PSA: Your Inheritance Isn't a Retirement Plan (Unless You Want to End Up Broke)
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I meet too many future inheritors who have been told they don’t need to save for retirement because they’re going to inherit millions.
Here’s the truth: your future inheritance is not a “get out of savings free” card.
People in wealthy families need to plan for retirement just like everyone else.
The question is: how do you plan for a future inheritance that isn’t guaranteed?
In this episode, I’m breaking down how to build a retirement strategy that works regardless of if, when, or how much you inherit.
We’re covering the saving strategies future inheritors often overlook, including:
Taking advantage of Roth accounts (even if you’re a high-income earner)
Maximizing flexibility in a taxable brokerage account
Avoiding the tax traps that can reduce the value of inherited accounts
The goal: a retirement plan where your inheritance is the cherry on top.
🗓️ Schedule a FREE call to talk more about how I can help you navigate a current or future inheritance.
Transcript:
Hey, I'm Katherine and thanks for joining me at Heir Necessities, the podcast that turns complex financial topics into real talk for Gen X, Millennial, and Gen Z inheritors.
Each episode of this podcast, I break down a different topic related to generational wealth and inheritance.
My goal is that you can stop trying to figure out what to do with your money by asking Google or ChatGPT what to do and come here instead for real talk, real solutions, and real advice that you can start implementing in your life today.
Should Future Inheritors Skip Saving for Retirement?
On this week's episode, we're diving into one of the biggest myths I hear from future inheritors and from future inheritors' parents, which is honestly terrifying.
Specifically, that you don't need to save for retirement if you think you're gonna inherit money in the future.
This is wrong on so many different levels.
In this episode, I'm going to break down exactly why that is and how you should be thinking about saving for retirement as a potential future inheritor.
Before I dive into it, a brief plug.
If you have been enjoying Heir Necessities, I would be so appreciative if you could take five seconds to leave us a five-star review wherever you listen to podcasts.
It's hugely helpful for the show and it helps me connect with and support more inheritors just like you.
Why Isn't a Future Inheritance a Guaranteed Retirement Plan?
How this situation usually comes up is I'll hear from a future inheritor: my parents told me that I'm gonna inherit money and that I'm good.
I don't need to worry about the future.
I hate this on so many different levels.
The first one is that a potential future inheritance is not a promise.
It is not a guarantee.
Until that money is someplace where it can't be touched by anyone else, whether that's in your account with your name on it or in a trust fund, you cannot assume it is going to be there in your future.
And I think it's wrong for parents to say this for their kids because someone could have the best intentions and then something goes haywire and all of a sudden the money that you were counting on for your retirement plan isn't there anymore.
What Could Cause You to Lose Your Expected Inheritance?
Maybe you and your parents got into a relationship-altering fight.
Maybe your parents get scammed out of a whole ton of money.
Maybe they decide to give all their money away to charity.
Maybe your parents get sick towards the end of their lives and then all of that money is drained by the cost of a long-term memory care facility.
In any case, even if you think or you would say you know you're going to inherit millions of dollars in the future, that doesn't mean that you can stop counting on yourself to provide for your own future.
What Are the Two Financial Futures Every Inheritor Must Plan For?
The root of this issue is that it's really hard as a future inheritor to understand what path you should be walking, because in effect, you are dealing with two vastly different financial futures.
In one financial future, you and your family have the assets that you have now.
What you've earned, what you've saved, gifts that you've already been given from your parents or family members.
And you have the assets that you can continue to earn and save over the course of your career up until retirement.
Let's call this scenario A.
And this is the scenario that you need to spend most of your time thinking about and working in.
How Should You Balance Your Time Between Both Scenarios?
But then at the same time, you have scenario B, which is that at some point in the next 15 to 30 years, your parents are gonna die and leave you three, five, 10, 20 million dollars.
At which point this retirement that you've saved up is gonna look like a joke compared to the amount of money that you have.
And even if that scenario B is the most likely outcome, it still shouldn't be where you spend the majority of your time thinking and planning.
For future inheritors, I always remind you that you can't plan on a future inheritance, but you need to plan for it.
And what that means is you should spend 85, 90, 95% of your time when you're thinking about your financial future figuring out how your money and what you can control is going to work for you for you to hit your goals.
And then maybe five or 10% of your time in this other scenario, educating yourself about estate transfer, talking to or trying to talk to your parents about their money, and learning and understanding what your future inheritance could look like, when it might come, and all of the details on that side of things.
What Happens If You Don't Save for Retirement and the Inheritance Falls Short?
But if you rely on this scenario B and you don't save for retirement, there are two really tricky pitfalls that you can run into.
The first one is the obvious one that I've already mentioned.
You don't save for retirement because you assume that you're going to get X amount of money from your parents.
Then your parents die and either you don't inherit their money.
Worst case scenario, you get nothing and now you're up the creek without a paddle.
Two, you do get money but it's significantly less than you thought.
I have seen and heard about this happening.
Parents say don't need to worry about it, you're fine, you're fine, you're fine, you don't save at all, and then you inherit $500,000, which is not gonna fund your retirement.
How Can Inherited IRA Taxes Shrink Your Retirement Funds?
Or you do get enough money to fund your retirement, but it all comes in an IRA, and because you have to fully empty that IRA in a 10-year period, there's a massive tax hit and now this $3 million account becomes $1.5 million, which isn't enough to fund your retirement.
That's one set of ways that getting an inheritance can maybe not go the way that you think it's going to.
But the other possibility is that your parents live way longer than you expected.
I have worked with first-time inheritors in their early 70s.
If your parents have longevity in their families, you might not receive the bulk of your inheritance until you are 65 or 70 years old.
What If Your Parents Live Longer Than You Expect to Work?
And the vast, vast majority of people I talk to, especially people who grew up wealthy, do not plan to be working until 65.
I hear, I want to retire at 50, I want to retire at 55, I want to maybe retire at 60, but I'm not meeting a lot of people who are planning to retire over 60.
And if you aren't saving for retirement on your own, then you're just sitting around waiting for your last parent to die so that you can retire, which honestly is not a position that I am interested in being in, and I don't think it's something that you really want to be doing either.
It just feels gross.
So then the question becomes, knowing or thinking that you are going to get this inheritance but not really knowing how much it's going to be and not knowing when it's going to come, how should you think about saving for retirement as a future inheritor?
Why Should Future Inheritors Consider Roth Accounts Over Pre-Tax Accounts?
Because there are a different set of considerations that come with the fact that it's likely in retirement that you are going to be worth a lot more than what you're worth now.
And so that introduces a different set of thinking about the tax consequences of how you're saving.
So for example, future inheritors may want to be more cautious about limiting the amount of money that they put into pre-tax retirement accounts.
Even if you're a super high earner right now, it may actually be advantageous to fund Roth accounts if you can instead of pre-tax accounts.
The reason for that is that if you inherit millions of dollars, five, 10, 20 million plus, in your 60s and 70s, you are gonna have a massive income problem.
The income problem being you have too much of it and you're paying taxes on all of it.
How Do Roth Accounts Provide Tax Flexibility After You Inherit?
Even if you're really high income earners now, it may make sense for you to be putting more money into a Roth IRA instead of a pre-tax IRA.
Yes, you'll be paying more money in taxes now in 2026, but the reality is that when you're in your 50s, 60s, and 70s, if you do inherit five, 10, 20 million dollars, you are going to have this massive income problem because you have all these assets that are generating income and you're paying taxes on all that income.
And it's likely that you're gonna be at a much higher or at least the same tax bracket when you've inherited that much money.
So putting more money in Roth accounts, even if it means you're paying more taxes now, can actually be the play to give you more tax flexibility and reduce the amount of taxable income that you're generating after you get your inheritance.
This is a great example of planning for an inheritance without planning on one.
You're still saving for retirement.
Is It Ever a Bad Idea to Have a Large Roth IRA?
You're still working to max out that employer account.
You're still working to max out that IRA, but you're doing it in a way that's tax advantaged with the possibility of a future inheritance in mind.
And even if you don't inherit or you inherit less than you think you're going to, it's never bad to have a massive Roth IRA.
No one has ever whined about that problem.
Why Is a Taxable Brokerage Account Important for Future Inheritors?
The second thing that you need to think about when you're saving for retirement as a future inheritor is potentially increasing the amount of flexibility you have by saving more into a taxable brokerage account.
This is highly dependent on the character of assets that you think you're going to inherit.
But for example, if one of your parents worked at a publicly traded company and the majority of their assets are in retirement accounts, in a 401(k), in an IRA, whatever it is, it could be significantly more beneficial for you to have money in a taxable brokerage account as opposed to an IRA or a 401(k) account.
How Do Taxable Brokerage Accounts Help Fund Early Retirement?
In addition to having a parent who worked for a publicly traded company and has all this money in their retirement accounts, having more money in a taxable brokerage account is also clutch if you think that your parents are gonna live for a long time.
And the reason is that, say you think your parents are gonna live till 95 and they had you when they were 30.
So you might not get the bulk of your inheritance until you turn 65, but you still might wanna retire at 50 or 55.
If you've done all of your saving into a 401(k) account or an IRA account, it's going to be really, really difficult for you to figure out how to get the money out of that account for that retirement period before you inherit.
For that 10 or 15 years from 50 to 65 or 55 to 65, when you are funding your retirement before your inheritance arrives, and then you move forward from there.
If you save into a taxable brokerage account though, you don't have to worry about where that money is gonna come from.
It's a source of money that gives you a lot more flexibility when you're thinking about funding an early retirement even though your inheritance isn't going to arrive for another 10 or 15 years.
What Does It Mean to Plan For an Inheritance Instead of Planning On One?
With all of that in mind, the key point that I want to leave you with in this episode is that when you're planning for a future inheritance, instead of planning on a future inheritance, you're kind of layering it on top of your current financial situation.
So what I want for you as a future inheritor is I want you to have confidence in your plan.
If you don't get another dollar from your parents, what are you going to do?
How much are you going to save?
How long are you gonna work?
When are you gonna retire?
What does your family's financial plan look like with only the assets that you are guaranteed access to right now?
How Does an Inheritance Fit Into a Strong Base Financial Plan?
So you build all of that and you feel confident in that plan.
And then as money comes in from your parents in gifts or as you get your inheritance, you also know, okay, well, if we inherit, this is how our life would change.
We would buy the vacation house.
We would retire earlier, or we would be able to spend more money in retirement.
The inheritance exists as part of your plan, but it's as an add-on rather than as that base plan.
Why Should Your Base Plan Succeed Without Any Inherited Money?
And that is what I'm talking about when I talk about planning for versus planning on an inheritance.
Your base plan needs to be successful with only the money that you have now.
But that doesn't mean that you can't dream and get excited about what your life could look like after you inherit.
It just means that you don't want to put your eggs all in that basket because it can go very awry very quickly.
If you have any questions about how to plan for two financial futures as a future inheritor, please reach out.
You can hit me up on Instagram at @sunnybranchwealth, shoot me an email, katherine@sunnybranchwealth.com, or if you're not ready to reach out in real time yet, I'll catch you on next week's episode of Heir Necessities.
Let’s take the next step together
Understanding how to protect, invest, grow, and/or give away a multi-million dollar inheritance isn’t easy. Inheritors can encounter a wide variety of different situations requiring knowledge and finesse to manage. If you need more help, reach out to Katherine Fox, CFP® and CAP®, financial planner for inheritors, to learn how Sunnybranch can help you evaluate your financial situation and build a plan for your financial future.
