Hey, no one wants to verbalize it; and it’s uncomfortable to even suggest it. Let’s discuss it, none the less. A little over fifty percent of people expect to inherit money from older family members and of this group, a quarter of those believe that inheritance will either largely or entirely fund their retirement.
As shocking as that might seem to take this in and digest it; this is even sadder to comprehend, that the average inheritance is gone within five years unless it was invested in financial assets or the equity of a house.
Yet, just twenty percent of inheritances are left in real estate and about seven percent held in equities. Over two-thirds is left in cash. So, we know, how that typically ends up.
What might you expect as an inheritance? Often, it’s in the three hundred-thousand-dollar ballpark depending on the age when the retired family member is, when they die – a little less if they’re in their sixties, a little more if they’re in the seventies and eighties and a little less again, if they’re in their nineties.
Here's the part that typically frustrates me the most when I look at how oldsters plan for their youngsters. The very plan that built typically up the most during the accumulation stage of their lives, typically the 401(k) account is the least efficient distribution strategy at death. The taxes due usually isn’t a chuck-a-chuck-change. It’s a chuck-a-chuck of real money. For some, the government may become the biggest beneficiary of what a person has toiled their entire lives for. Unfortunately, many have had the 401(k) account so ingrained into their investment thinking, that they can’t see the forest for the trees or should I say – the account for the plan.
People don’t plan to be inefficient with their money, but sometimes their accounts are.
If someone is going to get the balance of your money when you take the big trip, what’s your ‘plan’ of action or do you only have an ‘account’, hoping for the best?
[Compliance notes for Fortune Financial Services only – not for publication: Wealth Management.com magazine, June 2019 issue, Page 48. “Inheritance Trends and Realities”.
