Understanding the Impact of Average Inheritance on Retirees and Heirs

Average Inheritance: How Much Are Retirees Leaving to Heirs?

Leaving behind something for our heirs is a common desire for many of us. However, before we can focus on that, we need to ensure that our own lives in retirement are financially secure. This can sometimes feel like a daunting task, but it’s important to understand the average inheritance numbers and how they may impact our expectations.

Understanding the Varied Estimates

When it comes to average inheritance, different studies suggest different levels, resulting in widely varying estimates. Additionally, factors such as race, education level, and income play a significant role in determining the average inheritance amount. It’s crucial to note that the average inheritance numbers can be skewed due to the tendency of wealthier individuals to use tools like the NewRetirement Planner, which may inflate the overall average.

The Federal Reserve reports data on average inheritance based on whether or not the household has a college degree. It has been observed that those with a college education tend to leave behind more than those without.

In a study conducted by United Income, CEO Matt Fellowes examined how retirees feel and how their spending levels change during retirement. The study found that the “average” inheritance falls between $100,000 and over $1 million. However, it’s important to note that even this broad range of numbers can be incredibly misleading.

The Impact of Wealth Disparity

The average inheritance numbers are heavily influenced by the significant wealth disparity between the very rich and the middle and lower classes. The wealthiest 1 percent of families have inherited $447 for every $1 inherited by the least wealthy group of families. Those in the middle wealth ranges have received inheritances ranging from $14.8k to $51.4k, depending on their income bracket.

These statistics highlight that the average inheritance numbers are far from average for the majority of retirees. The ability of the wealthiest individuals in the United States to leave behind substantial inheritances skews the overall average.

Reasons for Deviating from the “Average” Inheritance

Aside from wealth disparity, there are other factors that may contribute to not leaving behind an “average” inheritance. Many households choose to share their wealth with younger generations while they are still alive. This can include paying for education, joint vacations, living expenses, and even helping family members buy houses or cars and pay off debt.

Furthermore, multi-generational living has become increasingly common. This trend was on the rise even before the pandemic and has continued to increase throughout the crisis.

It’s essential to remember that inheritances can come in various forms beyond financial wealth. Cultural values, a sense of humor, and sharing time and interests with heirs can also be meaningful inheritances.

Realistic Expectations and Retirement Planning

In all aspects of life, there’s a distinction between what we want to do and what we can do. Leaving behind an inheritance or assisting family members while you’re still alive is no exception. It’s crucial to have a realistic understanding of what you can afford and what is feasible.

Creating and maintaining a detailed retirement plan can help you assess what is possible and ensure that you are realistic about what you can afford. It’s important to regularly update your progress against your goals. According to NewRetirement, 89% of people who have set an estate goal are currently on track to achieve their goal for leaving a financial legacy.

While you may have worked hard to save and leave something behind for your heirs, it’s vital to consider your end-of-life and after-life wishes as well. As people live longer and healthcare expenses increase, more individuals are finding themselves depleting their financial resources, including home equity, to fund their retirement.

Ultimately, understanding the average inheritance numbers can provide valuable insights, but it’s crucial to approach them with realistic expectations and focus on comprehensive retirement planning to ensure financial security and fulfillment of your end-of-life wishes.