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Counting on an Inheritance for your Retirement? Key Issues to Consider

Counting on an Inheritance for your Retirement? Key Issues to Consider

Inheritance document

Saving for retirement is an important topic. With our unpredictable economy, increasing debt loads, student loans, and high home prices – combined with the fact that more and more people are working part-time, contract or self-employment work with no pension options, the future may seem pretty darn uncertain. Many Canadians (almost half according to a 2017 Nataxis poll) are relying on an inheritance as part of their retirement savings plan. However, ‘banking’ on this money as a sure thing can be quite risky, as there are several key factors that can impact how much (if any) inheritance you may actually receive. Here are some of those key considerations:

Living longer

Here in Canada, we are fortunate to have one of the highest life expectancies, with males on average living to 80.9 and females living until 84.7 years old. Living longer means spending money longer, and many of our seniors have long since retired, meaning that they are using up their savings accounts and other investments to support themselves. Even having saved a small fortune or sitting on a property that has quadrupled in value doesn’t automatically mean that the money will be there in ten, twenty, or forty years. In fact, some of us may find ourselves in a position where we may need to help support our parents financially as they age.

Cost of living

In addition to living longer, it’s important to acknowledge that the increasing cost of living can also eat away at retirement savings, leaving little to inherit. As the price of homes, condos, retirement living, and general costs associated with everyday living goes up, pensions usually don’t increase proportionately.

Living inheritances

A newer trend across North America is the ‘living inheritance’. This means that parents are giving large sums of money and other assets to their adult children while they are still living in order to support them financially. For example, many parents now help their children or even grandchildren with money towards a down-payment on a home, paying off student loans or other debt, or simply to see them enjoy more wealth instead of having them wait until they are deceased.

No wills

According to a 2018 study, approximately 51% of Canadian adults don’t have a will, and of those who do, only 25% say their will is ‘up to date’. With this is mind, we can’t assume that our parents even have a formal, current will, and if so, it may be so out of date that it may not be particularly helpful. Without clear instructions on how to divide up the money, a potential inheritance could get caught up in the legal system for a lengthy period, and depending on the circumstances, a significant amount of that inheritance money may to the government as well as to lawyers.

Bank on yourself

In today’s economy, we can’t ignore our financial retirement obligations in the hopes of one day receiving a large inheritance; the risks of doing so are high. Starting (and building) a retirement savings and investment plan now is the key to helping you secure your own financial future, for yourself and your family. If you are eager to get started, or if you would like to know your options, don’t hesitate to give me a call at 705-315-0516. I am always happy to help you better understand your investments to build a solid financial foundation for the future.

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