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Are You Relying on an Inheritance to Solve Your Problems?

12 November 2013

Some people like to put money into an RRSP. Others like to stash their money away in real estate, waiting until the exact right time to pull it out. Others however, like to play a different game when it comes to the stash what they have socked away for their retirement. Or rather, what they haven’t socked away. This is because some folks are counting on a big inheritance to set them free from their money woes. And that can mean big trouble.

39 per cent of working people say that they’re banking on an inheritance that will not only secure their retirement, but will also help them do things today, such as pay off bills. That is, as soon as they get it. That number comes from a recent HSBC Bank report, and it’s surprisingly down from the 50 per cent that the same survey showed last year. But banking on that inheritance might be a big mistake for those young people.

One reason for that is while people often think they’re going to get a large chunk of money (the HSBC survey said that the average inheritance expected is $77,213,) that may not be the case. One reason is because often children look at the entire parcel they think their parents will leave behind, and think that they’re going to get it all – not taking into consideration things like burial costs, debt that still needs to be paid off, and other children in the family.

But even when all of those things have been taken into consideration, there are other factors that might knock that inheritance down a peg or two.

That’s because things like taxes will take a portion, and leave children with significantly less than what they had thought about.

Of course, aside from the financial problems that counting your chickens before they hatch brings is that you are, quite literally, waiting for someone to die. And while that may seem morbid in some families, it also has some practical concerns. One is that people are living longer, and so that inheritance may not come at the time when they need it.

In summary, people – no matter their age – should be tackling their financial problems today, with the money they have, and not worrying too much about future windfalls that might save them from it. That way when that inheritance comes, it will be what it’s supposed to be – a nice boost to your finances that came unexpectedly and that you can put towards anything you may need at that time.

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