When you are considering how much you need to save for early or traditional retirement is it customary to include planned inheritances?
I've been planning on just not including it. I've always figured I'd get about $200,000 from my parents at least but I've never thought about it beyond that.
(This is my Grandparents dream to leave behind a ton of money, they are depression era and have worked their way up from nothing to what my best guess is a few million in the bank. I've repeatedly encouraged my Grandmother in particular to splurge on a nice vacation but she won't.)
This doesn't change my plans to save for my retirement and I'm not going to bank on a windfall. I just was wondering if this is what others do as well, or if it's normal to incorporate inheritance if you know how much you're likely to receive (which I do not.)?
I wish my Dad had spent a little more money on himself before Alzheimer's started. Instead he saved over half of his pension & Social Security for nearly 25 years. I don't think he denied himself (from what I can tell of his files) but I'm pretty sure he didn't indulge himself either. These days I'm his conservator, and I'm uncomfortably aware that his assets will outlast him.
Let me share a cautionary tale about "inheritance assurances".
Nearly 21 years ago after our daughter was born, my spouse and I were telling spouse's parents about our college-savings calculations. My FIL said "Ah, don't worry about that, we'll take care of it." That admonition was repeated for over a decade. A few years later (as the 1990s bull market took off) they started gifting my spouse to the annual limit. Their guidance was "Put this money wherever you want, and if we need nursing home care someday then you won't have to use your own money." (They even cautioned spouse to keep the money "in her name" with her brother POD so that it wouldn't leave the family through divorce or her death. Good advice, and I agreed with it, but the delivery was lacking in tact.) In effect they were gifting ahead of the Medicaid spend-down and giving strong hints that we should keep the money in CDs or savings bonds. At the time her parents were barely 60 years old, and her family has longevity into the high 90s. The gifting continued for several more years.
My spouse has known her parents all her life, and she knew how to handle this situation. We kept our opinions to ourselves. We kept working on our own college-savings program, and we just didn't discuss college expenses with her parents anymore. Spouse also took their gifted money, put it into I bonds, and nobody talked about that either.
A few years later her parents sold their paid-off East Coast home and moved to Hawaii to watch their only grandkid grow up. They put their profits into CDs. During that time the stock markets crashed, the housing markets took off, and interest rates started dropping. Soon, however, our daughter became a teen and wasn't interested in spending time with her parents, let alone her grandparents, who weren't acculturating very well out here anyway. When spouse's parents inevitably decided to move back to their ol' East Coast stomping grounds (with our enthusiastic support), they learned that in just six years they'd been priced out of the housing markets. The cashed-out equity from selling their old home had been steadily losing to inflation while it was "absolutely safe" in their CDs. (Apparently we trusted I bonds more than they did.) Their old home had doubled in value but they'd missed out. All the real estate cost more than they had.
There was no more talk of college funds, and the gifting had stopped when the stock markets had dropped. Instead they announced that they were taking out a mortgage to buy themselves a 2BR condo. They wanted "spouse's" gifted money (and its unrealized gains) for the down payment. This was not a plea for help or even a polite request... this was a notification that spouse was returning "their" money. We spent the next few years "gifting back" a six-figure sum so that her parents would be able to stay 5000 miles away from us. It puts a price on family harmony, and it's a bargain.
Spouse's parents live close to her brother, a CPA who manages their accounts and does their taxes. Nobody really talks about their finances, but from the kvetching we've heard over the last few years I suspect that they're 100% CDs. Her parents heckle each other over using electricity or water, they almost never go out for meals, and they won't even drive unless gas is "cheap". Their entertainment is the Internet (TV programs, streamed movies, & websites). They're frugal cheapskates (in the pejorative sense) and they'll live within their Social Security if necessary. Spouse does not expect that her parents will ever ask for her help. If spouse's brother asks for help then she'll write him a check.
Spouse claims to be "so over" her parents, and I'm the only one who sees her tears.
Just to lighten up this post a little, here's another entertaining perspective on inheritances from Jason Hull:
http://www.hullfinancialplanning.com/if-youre-waiting-for-an-inheritance-you-are-a-sick-entitled-teat-sucker/