Are you pinning your hopes on an inheritance?

01 June 2016

Despite the major push recently by the government to encourage us all to take more responsibility for our retirement planning, ask around and many of us are still banking on an inheritance to bolster our pension pot.

“We frequently speak to clients who are in their 40’s and 50’s about retirement planning and find that many are hopeful that any inheritance that they will receive from their families will help fund their retirement plans, however many receive 50% less than they expected!” notes Absolute Wealth Management’s Simon Harnaman. “Certainly, in our opinion do not to rely on the Bank of Mum & Dad to fund your retirement!”

The Inheritance Gap

As Simon notes people frequently overestimate the final value of an inheritance, wrongly assuming that as property prices have significantly risen the sale of a family house could net them a significant amount.

“We find that few appreciate how later life costs are all impacting upon the average inheritance that they will receive.Since baby boomers, those born in the years from 1946 to 1962, are all living longer, the rising cost of care that their older generation have to pay, coupled with Inheritance Tax, greatly affect the final sum received.”

Retirement Planning

At Absolute Wealth retirement planning starts by considering what sort of income you would like to receive once you retire. Considering retirement planning in your 40’s and 50’s, or even earlier if possible, helps to ensure that adequate funds will be available come the day you want to retire.

“For most of us our income comes from paid employment – that regular salary at the end of month which is so quickly swallowed up. When we work with clients to plan for their retirement, we always start by asking them what sort of monthly income they would like to live on once they cease paid employment. Then it is a matter of planning to see how we can help a client reach this goal.”

Protecting your inheritance

The past two budgets have seen some significant changes to the Inheritance Tax thresholds. Whilst estate planning may seem an unusual subject to broach with relatives, Simon’s advice is to encourage an early review with a dedicated financial planner to help mitigate any Inheritance Tax Bill.

“It may sound like an uncomfortable topic to discuss, indeed only about 2% of Britons proactively seek financial advice for inheritance planning to help maximise what is left from an estate following death duties and tax.

“As with all financial planning,” concludes Simon. “The earlier you start planning and resourcing your later life plans, the more effective they will be and ultimately the more prepared you will be.”

If you have any personal financial issues relating to this article and require further advice, please contact Simon Harnaman or Pete McBride on 0117 907 1965 or info@absolutewm.co.uk.

Categories: Advice, pensions, retirement