Why relying on inheritance for retirement is a bad idea and what you could do instead

Inheriting money can have a massive impact on our finances. Receiving a lump sum can help you pay off your mortgage, pay for travel or give you a bit of extra money in retirement. However, for some, receiving an inheritance has gone from a nice-to-have to something more like a necessity.

A recent survey by Hargreaves Lansdown showed that just under one third of people believed they would need an inheritance to give them enough income to live on in their retirement years.

Invest in Gold

American Hartford Gold: #1 Precious Metals Dealer in the Nation Learn More

Priority Gold: Up to $15k in Free Silver + Zero Account Fees on Qualifying Purchase Learn More

Thor Metals Group: Best Overall Gold IRA Learn More

Powered by Money.com - Yahoo may earn commission from the links above.

Younger people were more likely to say they thought they would need one, though this may be because they haven’t had the chance to work out what kind of income they are on track for in their later years. However, one in five people aged over 55 said they will need money from an inheritance to get by.

Read more: The state pension is set to rise — here's how much it could go up by next April

Of course, this brings all kinds of challenges. For a start, you may think that your elderly relative has more money than they actually do and so the inheritance you receive may not be what you were expecting. This can particularly be the case if the elderly relative needs to go into a care home, which can drain people’s savings quickly – or if they decided to release equity from their home.

People’s circumstances can also change over time and the arrival of new spouses, children and grandchildren later in life may mean priorities shift and money needs to be allocated elsewhere. Relationships can also ebb and flow and you may find bonds that were once close are weakened over the years.Just under a third of people think they'll need an inheritance to give them enough to live on in retirement but relying on this can be problematic.·10'000 Hours via Getty Images

What you can do instead

The key is to take control of your own retirement planning as much as possible, so you have an idea of how much you have and how much that is likely to give you in retirement. Having a good idea of the kind of lifestyle you want means you can be more targeted and plan how you are going to get there.

Online calculators will give you an idea of how much your pension will give you in retirement and this gives you the chance to put a plan in place to fill in any gaps.

Read more: Why lifelong housing costs are derailing retirement planning for older people

Increasing your own contribution every time you get a pay rise or new job can really help your pension grow and you should also make sure you are making the most of your employer contribution. Many employers contribute at auto-enrolment minimum levels but there are others who are willing to increase their contribution if you increase yours. If you have the spare cash, it can be a great way of boosting your pension.

Story Continues

Having a robust plan in place for your retirement gives you the confidence of knowing you are on track and will make you much less reliant on any kind of inheritance to help you fund your lifestyle.

Helen Morrissey is Yahoo Finance’s pensions columnist. She works with the media to raise awareness of key retirement issues to help people build financial resilience in retirement, and is the head of retirement analysis at Hargreaves Lansdown.

Read more:

What living longer means for your pensions and retirement planning Three key rules to protect your finances as a parent What to consider when writing a will

Download the Yahoo Finance app, available for Apple andAndroid.

View Comments