There's a new trend among retirees that could be costing them the comfortable retirements they probably dreamed of: giving away their money while they're still alive, instead of bequeathing it to heirs.
This so-called "living inheritance" trend, according to a report from HSBC Retirement titled "Future of Retirement: Choices for Later Life," indicates that more than 43 percent of retirees are providing regular financial support to at least one other person. Ten percent are supporting at least one adult child.
It's not just retirees; 62 percent of those still working are also providing regular support to at least one other person. And along with that has come a change in attitudes toward leaving legacies, likely out of necessity: 23 percent of working-age people said it was better to spend what they have while they're alive to enjoy it and leave it up to the kids to build their own financial security, and just 9 percent are going to the other extreme and trying to put aside as much money as possible to leave for their heirs.
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"Living inheritances add another dimension to the already complex financial pressures faced by retirees," Andrew Ireland, EVP and head of premier banking, HSBC Bank USA, N.A., said in a statement.
Ireland continued, "A desire to support loved ones during your lifetime is of course understandable, but for many people this comes at a cost both to their retirement dreams and to their ability to leave a legacy."
That cost seems to be evident in the disconnect between people's attitudes about legacies and the fiscal reality. While 59 percent saying they expect to leave their kids a chunk of money when they die, only 31 percent say they've actually gotten one.
The scary thing about this is that many retirees are looking to the inheritance fairy to fund their own retirements. Twenty-nine percent of retirees who have either already been the recipients of a bequest or who expect to inherit money believe that it will pay either all or part of their expenses in retirement.
And almost half of those still in the workplace (49 percent) expect that they'll be named a beneficiary to a sum of money that will free them from worries about how to pay for their expenses as they age.
A quarter of retirees are worried about not being able to support their families or friends financially, while 23 percent are also afraid of themselves becoming dependent on family or friends for financial support. The research also indicated that 59 percent of retirees have had to abandon at least one of their retirement goals—something that is a distinct possibility for those who give it all away while they're still alive instead of through a will.
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