America is known as the land of opportunity, but when it comes to generous inheritances, it’s best to look outside the country’s borders.
The U.S. lags five other countries when it comes to the amount its retirees plan to leave their heirs. Americans expect to leave a median inheritance of $177,000, less than half of the $502,000 inheritance that Australian retirees plan to bequest, according to a new study from HSBC.
One reason for the disparity between the U.S. and the land down under is that Australia has no inheritance tax, notes The Australian.
Yet all five countries that place ahead of the U.S. — Australia, Singapore, the U.K., France and Taiwan — all share one trait: a system of universal or national health care. That raises the question of whether Americans expect to leave less to their heirs because of having to plan for higher medical spending.
End-of-life care in the U.S. can eat away at seniors’ savings, a 2012 study published in the Journal of General Internal Medicine found. During the last five years of their lives, a quarter of Medicare recipients spend more than their total assets on health care costs, the study found. That’s because Medicare doesn’t cover items ranging from home-care services to non-rehabilitative nursing home care.
But the travails of life might also be to blame. Baby boomers have on average been set back by $117,000 because of life’s financial “derailers,” ranging from a plunge in the stock market to needing to support a child or grandchild, a separate study from Ameriprise found earlier this year.
The HSBC study found that about 43 percent of the working age population expects to receive an inheritance, which is actually lower than the 51 percent of retirees who say they will definitely or probably leave money to their heirs.
Yet in what the report calls a “worrying” finding, one in 10 of those expecting an inheritance say they plan to rely on that money to entirely fund their own retirement.
“Even where people can reasonable expect to receive a windfall of some sort, it is important that they do not come to rely on that windfall entirely,” the report cautions. “They are likely to face severe financial hardship in retirement if, for some reason, the windfall doesn’t materialize.”