What's the Typical Inheritance American Retirees Pass On?

Time Business News

4 hours ago

When planning for retirement, many Americans think not only about their own financial security but also about the legacy they'll leave behind. A common question arises: how much do retirees typically pass on to their heirs? Recent data sheds light on the average inheritance left by American retirees, offering insights for both those planning their estates and those expecting to receive an inheritance.
According to a 2023 analysis by the Federal Reserve's Survey of Consumer Finances, the average inheritance received by American households is approximately $84,000. However, this figure can vary significantly depending on factors like wealth, age, and family structure. For retirees specifically, the amount they leave behind often depends on their savings, investments, and real estate holdings.
Wealthier households tend to leave larger inheritances. For example, the top 10% of households by net worth leave an average inheritance of over $500,000, while those in the middle 50% pass down closer to $50,000. These disparities reflect the uneven distribution of wealth in the U.S., where assets like homes, retirement accounts, and stock portfolios play a significant role in estate planning.
Inheritances often come later in life than many expect. The average age for receiving an inheritance is around 40, meaning most heirs are well into adulthood when they receive these funds. This timing can influence how the money is used—some may invest it for retirement, while others use it to pay off debts, fund education, or purchase a home.
For retirees, deciding when and how to distribute assets is a key consideration. Many choose to gift money during their lifetime, taking advantage of tax benefits like the annual gift tax exclusion ($18,000 per recipient in 2025). Others opt to leave assets through wills or trusts, ensuring their wishes are followed after they're gone.
For many American retirees, their home is their largest asset. The value of real estate often makes up a significant portion of an inheritance, especially in high-cost areas. However, passing down property can come with challenges, such as capital gains taxes or disagreements among heirs about whether to sell or keep the home.
Retirees planning their estates should consider consulting financial advisors to navigate these complexities. Strategies like setting up a trust or transferring property before death can help minimize tax burdens and streamline the process for heirs.
The average inheritance of $84,000 can make a meaningful difference for heirs, but it's often less than many expect. For retirees, careful estate planning is crucial to maximize what they leave behind. This includes updating wills, designating beneficiaries for retirement accounts, and considering life insurance policies to supplement inheritances.
For those expecting an inheritance, it's wise to avoid relying on it for immediate financial needs. Instead, treat it as a potential boost for long-term goals like retirement savings or debt reduction. Financial experts recommend discussing estate plans openly with family members to avoid surprises and ensure everyone's expectations are aligned.
As wealth continues to transfer between generations, the landscape of inheritances in the U.S. is evolving. Rising home values and growing retirement account balances may increase the size of future inheritances, but economic factors like inflation and healthcare costs could offset these gains for retirees.
Whether you're a retiree planning your legacy or an heir anticipating an inheritance, understanding the typical amounts and their implications can guide better financial decisions. By preparing thoughtfully, both generations can make the most of this important transfer of wealth.
TIME BUSINESS NEWS