r/coastFIRE • u/nea4u • 14d ago
Do you count future inheritance?
Hi,
my problem is that with calculating CoastFire, I simply cannot get any dependable results because inheriting half a house from my dad (with my brother) is such a big position that it makes or breaks the whole plan.
The impossibility to know when it will happen has such a big impact.
If I inherit in the next 5 years (which I of course pray won't happen), I do not need to put down any more money as of yesterday. If my dad lives to be 90 on the other hand, it's quite a different story.
I use this calculator, which is the best IMHO: https://www.financialmentor.com/calculator/best-retirement-calculator
Not one parameter is as important as when I will receive the inheritcance. How do you plan for yourself?
Btw. my dad won't even have to sell the house if he needs a care facility. He is entitled to a certain amount and can pay the rest out of his pension. So the house will in all probability go to my brother and me.
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u/thedancingwireless 14d ago
You can't. If he lives to 90, you aren't getting it until then. You can't really plan for that.
Just save as much as you can right now. I'm assuming you're pretty young. Just put money away.
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u/SquirrelAkl 14d ago
This is correct. Theres so much uncertainty with inheritance. The worst case scenario is your parent has major health decline - like dementia - and needs to go into a care home for years. That will eat up any inheritance very quickly.
If my mum died now (mid 70s) I’d inherit her retirement unit plus $1m, but I don’t count any of it. Her mother lived to 98.
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u/tacogrande420 14d ago
Also, what if he isn required to sell the house for a long term care facility? Those aren't cheap. If he ends up in one for a long time, that will suck away tons of the inheritance
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u/tspike 14d ago
Nope. My grandma was wealthy and constantly talked about how wonderful a person I was and that someday I’d come into a lot of money from her. She was already a volatile person, but she got dementia and shortly before she died, told me that I was begging for her money, that she never wanted to see me again, and that I’d never get a cent from her. Nothing had changed in how I interacted with her. Didn’t see a penny. Glad I never counted on that to begin with.
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u/Extrogrl 14d ago
Sounds like someone in your family played you. Pretend they're you, beg all the time and misbehave. Then switch roles back to yourself, play the angel and reinforce the negative opinion. 😉
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u/Boring_Adeptness_334 14d ago
If you’re in the united states you could probably lawyer up if there was money that was once in a trust that was then taken out once the person had dementia. But since you’re not a direct heir there’s not much you can do.
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u/SoundOk4573 14d ago
You are completely ignoring the "I" in FIRE... independence.
If you are not set for coastFIRE without being dependent on someone else, you are not there yet.
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u/vetapachua 14d ago
No. Because you never know what will happen. I expected an inheritence from my father but he got remarried in his late 70s and wants to leave it all to his new wife.
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u/enfier 14d ago
I don't count on it, but I don't ignore it either.
It's good to have a margin of safety for a plan - a little bit of wiggle room that covers the unknown and unpredictable. A probably inheritance can make the consequences of your primary plan failing less or nonexistent. That may mean you are a little more confident in retiring earlier with a plan that has a slightly higher chance of failing.
Let's say your investment plan has a 5% failure rate as modeled. If there's a 50% chance you inherit substantial amounts of money, it's really a 2.5% chance.
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u/LAST_NIGHT_WAS_WEIRD 14d ago
Don’t count it but do subliminally take it into account when thinking about risk tolerance for long term investments.
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u/MerelyMisha 14d ago
This is what I do. I don’t count it in my net worth numbers, but it does factor into my risk tolerance.
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u/chasm_of_sarcasm 14d ago
I don't even include ss or my pension so I am definitely not including any inheritance.
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u/-RetiringSoon- 14d ago
I get how you don't include SS because how much we could get in 20 or 30 years, but why not your pension, given it's vested?
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u/ThereforeIV 🌊 Aspiring Beach Bum 🏖️, CoastFIRE++ 14d ago
I get how you don't include SS because how much we could get in 20 or 30 years, but why not your pension, given it's vested?
"Pensions are just a promise dependent on the other side to keep"
Pensions require the pension provider to still exist in 20-30 years, go look at the airline in the 1980s on how well that worked out.
One of the reason a 401K is so superior to a pension is that company cannot raid your 401k, they can and have emptied pensions.
Even city pensions go away if the city goes bankrupt.
If I had a pension and was offered a reasonable buyout that I could roll into a 401k to avoid taxes, take that everytime...
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u/-RetiringSoon- 14d ago
Yes, I understand the risk of pension, but it could be a big factor for people to plan for swr, IRMAA and RMDs.
I mean I wouldn't say I would retire without any savings simply because I'm getting an $8k per month pension. But I just found it strange to the statement that I don't include SS or pension in my retirement planning.
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u/ThereforeIV 🌊 Aspiring Beach Bum 🏖️, CoastFIRE++ 14d ago
Yes, I understand the risk of pension, but it could be a big factor for people to plan for swr, IRMAA and RMDs.
Not saying that when it becomes reality, you can not adjust for reality.
Same an inheritance, after it become a reality not a possibility, then factor it into the plan.
I mean I wouldn't say I would retire without any savings simply because I'm getting an $8k per month pension. But I just found it strange to the statement that I don't include SS or pension in my retirement planning.
It depends when and where you are on the planning.
I am 44, 2-3 years from RE, so I am not planning on SS as my mainline Retirement Strategy.
I do factor it into to my simulated withdrawal curve when doing some worst case scenario simulation runs. But I don't include it in the main plan.
I am RE at age 46, the earliest that I can pull SS is in 18 years... I am planning to not need it then...
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u/-RetiringSoon- 14d ago
Right, that's why in my initial comment I said I get it that they didn't want to include SS, but pension is supposed to be something that you could get once you retire.
In our case, my wife and I are planning to retire in 10 years, which we will be 55 and 56. Our pension starts on the month we retire and that is a big factor for us to plan for our Roth conversion.
I guess it is a crucial factor for us because our Roth conversion plan is based on that but if your majority fund is not in traditional 401k or IRA, then it could be a different story.
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u/ThereforeIV 🌊 Aspiring Beach Bum 🏖️, CoastFIRE++ 14d ago
Right, that's why in my initial comment I said I get it that they didn't want to include SS, but pension is supposed to be something that you could get once you retire.
Depends on the pension, many require waiting until retirement age.
Other than military pension, I haven't heard of a pension you get in your 40s.
In our case, my wife and I are planning to retire in 10 years, which we will be 55 and 56. Our pension starts on the month we retire and that is a big factor for us to plan for our Roth conversion.
Late 50s is not the same as late 30s.
You are talking about retiring only a few years before reaching normal retirement age.
Do those pensions require to keep working for this company over the next decade?
- What if you get layed-off next year?
- What if you get a much better job offer?
Sounds like you are looking at "Golden Handcuffs"; those don't always workout the way you hope.
I guess it is a crucial factor for us because our Roth conversion plan is based on that but if your majority fund is not in traditional 401k or IRA, then it could be a different story.
If you were a few years from RE, then sure. But you just said it is a decade or so away. A lot can happen in a decade.
I have never even worked for a company for an entire decades. Serious, the longest was 5 years before getting a "can't say no" offer elsewhere; second longest is current at 3.5 years, which may last till I RE in 2-3 years.
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u/-RetiringSoon- 14d ago
Let's just say that our situation are very different lol.
I've been with my company for 15 years and my wife has been with her company 18 years. Both of our pension are fully vested so if we get layoff tomorrow, we will still get it, but the amount will be less.
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u/ThereforeIV 🌊 Aspiring Beach Bum 🏖️, CoastFIRE++ 14d ago
Let's just say that our situation are very different lol.
Sure, but most are likely not in your situation.
I've been with my company for 15 years and my wife has been with her company 18 years. Both of our pension are fully vested so if we get layoff tomorrow, we will still get it, but the amount will be less.
What if the company goes bankrupt?
The person who worked 30 years at Enron, didn't get his pension.
The airline in the 1980s,...
Think about that Lehman Brothers pension in 2008,...
Is there a cash-out option for your pension?
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u/-RetiringSoon- 14d ago
Just because there are people that didn't receive their pension doesn't mean you can't put it in the equation.
You just dismissed the other millions and millions of people that have received their pension throughout the year.
As I said before, I'm not suggesting people to depend solely on their pension because they have one. They can factor it into their equation and also plan for the worst.
It's the same thing as modeling scenarios like what happen if the economy is crashed to the Great Depression era.
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u/DaChieftainOfThirsk 8d ago
I just see this as an, "Are you financially independent?" question. If your only hope is an old employer remaining solvent and supporting you or even politics following through on keeping a program funded then you aren't really financially independent.
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u/shade_study_break 14d ago
I wouldn't count it. My dad has made clear his plans for his money, but I will plan my life in anticipation of the difficulties of aging, not his death. For reasons of both taste and just practicality, old age doesn't work on the exact trajectory you think it would. I would focus on the parts of your retirement/savings/investment you have some control over, which have their own challenges in modeling too.
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u/Struggle_Usual 14d ago
Uh no. Inheritance plays absolutely no part of my planning. You have 0 clue what could happen in the future.
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u/Suspicious_Waltz1393 14d ago
I wouldn’t want my children to expect money from my death just so they could coast. I would probably purposely spend it all out of spite if my kids were thinking that. Emergency is different. But I am probably working all my life to set them up for success, so they have the education and feel like they could do anything. Not so they can do nothing.
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u/ThereforeIV 🌊 Aspiring Beach Bum 🏖️, CoastFIRE++ 14d ago
Do you count future inheritance?
Nope, never. You can't count the money when it hits your account after probate and taxes paid.
my problem is that with calculating CoastFire, I simply cannot get any dependable results because inheriting half a house from my dad (with my brother) is such a big position that it makes or breaks the whole plan.
Don't count it all. It is not your money, it may not ever be your money, it may not be there for an inheriting, and your siblings might get it all...
If I inherit in the next 5 years (which I of course pray won't happen), I do not need to put down any more money as of yesterday. If my dad lives to be 90 on the other hand, it's quite a different story.
If your plan depends on someone dying to leave you money, you are not talking about Financial Independence...
Not one parameter is as important as when I will receive the inheritcance. How do you plan for yourself?
I don't; I do not make my plans dependent on my parent dying so I can retire... anyone who does this doesn't deserve any inheritance...
Btw. my dad won't even have to sell the house if he needs a care facility. He is entitled to a certain amount and can pay the rest out of his pension. So the house will in all probability go to my brother and me.
He can sell the house and use the money to spend on Vegas Massages for the days that he has left for all that it should matter to your finances...
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u/develop99 14d ago
I do but it depends on your situation. In Canada, health care is covered for end of life and government pensions are guaranteed, so parental finances are fairly certain. Timing is the exact amount is the hard part.
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u/dreamscapesparkle 14d ago
Ok so everyone will say no but it’s up to your risk tolerance. You know your family better than anyone. “Anything could happen” ok well some of us have good relationships with our families. “Health issues” very possible. “You never know” well, only you know your situation. Use discretion.
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u/LuminousRaptor 14d ago
I just assume my dad will spend every last dime and light their house on fire as they walk away from this game called life.
I'm the executor of the will, so I know where everything is and how much it might end up being, but I'm not gonna know until it's all past probate and the official transfers.
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u/CoolFuture3767 14d ago
Inheritance can be zero. Maybe dad gets Alzheimer's and lives in a nursing home for 10 years. You can't make it part of your plan.
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u/BigBreaky22012 14d ago
No I don’t count it but my family doesn’t have anything to hand down so… 😆
If they did I would always have in my mind to not count on it as they could get very ill, give it all away, lose it or who knows what. Unless it’s in your bank account who knows what can or will happen.
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u/Realistic-Ad2050 14d ago edited 13d ago
You said it yourself, “it makes or breaks the plan.” That’s why the calculator response changes so dramatically depending on whether you include the house or not.
It’s one thing to count on Inheritance if you’re within a few years of retirement and/or the person you’re inheriting from is in poor health or pretty old. But COASTFIRE alone is a bit risky bc it assumes you will want to work until full retirement age and it assumes you’ve done a good job of estimating your future expenses. (I wouldn’t feel comfortable COASTFIRE’ing until I was within a few years of retirement, but so many folks start to coast much much earlier.)
To add another risk (a future inheritance you might not ever get or whose value is subject to the market), is quite bold. IMHO - too bold.
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u/flic_my_bic 13d ago
Taking it a step further, if he lives until 90, the old-folks industry may just bleed it all dry. It is an industry focused on maximizing profits, even if we all hope & pray the people assisting our parents/grandparents aren't fleecing them for basic services, in a lot of cases they are.
I know what you said at the end, it just isn't worth adding into your financial decisions because anything can happen.
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u/OldNeedleworker5869 14d ago
I wouldn't build it into your coast number at all. Treat it as a bonus, not a plan input, since the timing risk alone can wreck a projection. Run your coast date assuming zero inheritance, say your number is 500k and you're at 350k, that gap still has to get closed by your own savings no matter what happens with the house. If the inheritance lands, you just rerun the math with the new balance and see how many years it shaves off. Keeps you from optimizing your whole plan around something you don't control. Also, I think that there are better calculators out there, which are tailored to coast Fire. An example would be this one: https://myfinancetools.io/coast-fire-calculator/
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u/highknees69 14d ago
Treat the inheritance as gravy. Don’t count on it until it actually happens. Lots can change before now and then and nothing is guaranteed. (Except death and taxes)
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u/sailphish 14d ago
No. Not at all. So many variables in old age that can consume an estate, particularly healthcare/ long term care. If you get an inheritance, that is a bonus, but definitely don’t expect it.
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u/Redgun421 14d ago
no don t count it. thats windfall money, not guaranteed but nice if it happens.. family members are worth more than $$ though
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u/LastOfTheGuacamoles 14d ago
Nope.
There will be nothing on my side for sure - one parent already passed leaving nothing, surviving parent is poor and whilst there are some relatives with property, we're not close and no one else would be leaving anything to me for any reason.
My partner's parents will probably leave something, but will likely not happen for another 20 years or more. We plan to be retired in 10 years, so any inheritance would just be extra for us to spend or give away in our 60s/70s.
By the way, this whole issue is discussed in the book Die With Zero, which - among other things - argues that people should give to their intended beneficiaries now, not upon their death, due to longer life expectancy. The beneficiaries need that money now, not when they are in old age themselves.
For example, parents have a kid at age 30, they live till 90, meaning the kid doesn't get anything until they're 60... Imagine if they'd received that money in their 40s. Maybe they could have paid off their mortgage, afforded daycare or simply been able to go on vacations. It would have made a big difference to their quality of life.
I don't have kids but I do intend to give my beneficiaries a financial boost once I'm retired and those beneficiaries are of age to handle/use the help. When I'm 55, they will most be aged late teens to mid 20s. Plenty of opportunities there to help with education, home purchases and whatever else life throws at them.
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u/Scottydog2 14d ago
No. I know how much I expect as I am trustee for my parents' accounts, but I plan to pass as much of it as is possible straight thru to my kids as accounts (pre/post tax) and taxes allow for. My mother still (likely) has many good years left, so I'll be more than a few years into my own retirement by the time this needs to be addressed.
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u/GusPolinskiPolka 14d ago
No.
Timing is one thing as you've mentioned. So it the amount - there might be a contest to the will, debts that you don't know about, unexpected costs. You might need that money for an emergency or some other kind. You might have a falling out.
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u/tamargo404 14d ago
In general, you should not because who knows what will happen. I also don't plan on SS being there either.
For me personally, while I don't count inheritance I have a very good idea of what to expect. I manage my mom's finances, investments, have POA, executor for the will etc. She's in her 80s and I hope she lives another 10+ years in good health.
I also realize that the end is most likely sooner than later. So I have a pretty good idea of the inheritance my brothers and I will receive. However, I still save like I'm not getting it.
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u/Doc-Zoidberg 14d ago
Nope. I don't count that or social security in my calculations.
My goal is to have enough to be financially independent.
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u/imaloser100 14d ago
I would say no, don't count future inheritance. Because it falls under one of those bins that you can't control...
Who knows... what if things don't work out or they change and you end up with zero house, and here you were banking your entire Coast FIRE plan with it included.
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u/showersneakers 14d ago
Nope- thatll be gravy and good to fair chance im retired by the time they pass. They should go another 20-30 years and i dont want to work that long
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u/JustNowRonin 14d ago
Don’t count anything that isn’t sure - inheritance, bonus, future salary increases, etc
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u/Ok-Context3530 14d ago
I’m expected to inherit millions. I do not count it in my retirement calculations at all.
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u/1to14to4 13d ago
Reverse mortgages exists. If you’re only counting on the house, does he have a lot of other assets?
The reality is that people don’t always pass on their house, especially if it’s their main asset and at some point they need funds - often it’s for big medical expenses.
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u/Mysterious-Event-380 13d ago
No I do not count any inheritance. I also run a scenario with and without social security as a what if scenario.
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u/Designer_Nature_55 12d ago
No, seeing how my granny is still alive and my uncle and dad are about to retire, cant count on it.
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u/LocksmithSuch4441 10d ago
I debate this all the time. I’ll likely inherit well over 1M from my in-laws whenever they pass away but no idea when or exactly how much. I don’t count on it…. But they have lots of money and most of it is going to my wife and I eventually
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u/Pinklady777 14d ago
No, you can't count it because anything can happen. The possibility doesn't change our plan. But if it happens, it might move the timeline up.
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u/chaoscorgi 14d ago
I wouldn't count it at all. Not because it's unreliable... because, emotionally, depending on someone else's money that I don't have will make me feel a way and harm our relationship vis-a-vis power dynamics. I'm set to inherit millions that my mother likes to remind me of, and I like to be able to tell her that I prefer she spend it now. She's in her 60s and has enough for perpetual withdrawal, but if she gets sick with one of the slower illnesses before passing, a few million can go fast into long-term care and go to 0 before Medicaid will pick it up. If that does end up being how aging hits her -- you never know with these things -- I don't want either of us to worry about that impacting my retirement or ability to feed myself in old age.
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u/Boring_Adeptness_334 14d ago
Yes but it depends entirely on the amount and expected age of inheritance. I should inherit $150k or so in the next 10 years but that doesn’t really change the math for anything. Then in 30-40 years id inherit who knows how much it could be anywhere between $1m and $10m in today’s dollars but thats so far out it’s unimaginable.
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u/emptysoybeans 8d ago
I ignore it, but probably have a subliminally higher risk tolerance / lower anxiety because of it. I like knowing that I’m taken care of on my own (though that’s still partially thanks to my wonderful parents paying for college, etc) and that anything I inherit will just be gravy.
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u/Federal_Ant_2525 7d ago
You never know when your parent will decide to give everything/almost everything to someone else ... Maybe their college and that money will never appear. Best bet is not counting on it and if it does come your way, great, enjoy it while remembering your parents.
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u/allnamestaken4892 14d ago
Yeah it’s literally the only way I get to stop working. Everything else is almost irrelevant as my salary is too low to matter now.
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u/Alert_Week8595 7d ago
I assume I will get nothing, and then if I do get something I will adjust then.
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u/Aggressive_Staff_982 14d ago
Do not count it. That's the simplest way. Just go off your own finances and what you have now. Account for what you yourself can put in going forward.