When it comes to the so-called Great Wealth Transfer, 'I don't think people should count on it,' one financial adviser says

Just 43% of Americans age 65 or older plan to give an inheritance or financial gift, according to LendingTree.

If you're counting on an inheritance to retire, you need a new retirement plan.

One-third of Americans younger than age 65 expect to receive an inheritance or financial gift in the future, a new LendingTree study shows. That share rises to 53% among those who are earning $100,000 or more.

Among those who expect to receive an inheritance or financial gift, 43% say their retirement planning depends a great deal on that expected windfall, LendingTree found. Only 25% of those who expect an inheritance or financial gift say the possibility of receiving it hasn't affected their retirement planning, the study said.

"If an expected inheritance is required for your retirement plan to work, you have a bad retirement plan. Even when you are confident that an inheritance exists and is intended, there are no guarantees," said W. Michael Lofley, a financial adviser with HBKS Wealth Advisors. "An inheritance may eventually provide a nice addition to your retirement resources, but I wouldn't build a retirement plan that depends on receiving it."

Homeowners ages 65 and older could pass down roughly $17.2 trillion between 2026 and 2045 - an average of $859 billion a year, LendingTree estimated. However, just 43% of Americans age 65 or older plan to give an inheritance or financial gift, the study found.

Overall, consulting firm Cerulli Associates estimates, $72.6 trillion in funds will go to younger generations in the nation's "Great Wealth Transfer" over the next 20 years.

"Ultimately, that money is the parents', and they can do whatever they want with it. The Great Wealth Transfer has been talked about too much, and until it has actually happened, I don't think people should count on it," said Trevor Ausen, a financial adviser with Authentic Life Financial Planning.

Just 57% of Americans expecting an inheritance or financial gift report having clearly discussed those expectations with the giver, LendingTree found. Meanwhile, 16% of those expecting an inheritance haven't discussed it at all with their hoped-for benefactor.

"It may be smart to dial back expectations," said Matt Schulz, LendingTree's chief consumer-finance analyst. "Ideally, you save and do all the things you should, and if an inheritance comes through and it's significant, great. But having it be something that's the primary driver of your retirement plan is a problem."

The risks to the Great Wealth Transfer include longer lives, healthcare costs, rising costs of living and taxes. Fidelity Investments estimates that a 65-year-old retiring in 2026 can expect to spend an average of $185,500 on healthcare and medical expenses throughout retirement - and that doesn't include long-term-care costs.

"There's often a gap between what people hope to leave behind and what ultimately gets transferred," Schulz said. "Many older Americans fully intend to pass wealth to the next generation, but retirement can last 20 or 30 years, and financial needs change over time. Healthcare expenses, long-term care, market fluctuations, inflation and the cost of living can all reduce the value of an estate before it's ultimately transferred."

If you do include a potential inheritance in a retirement plan, be conservative with estimates.

"It can be appropriate to include an expected inheritance in retirement planning, particularly when it is substantial or important to the prospective heir's ability to retire. However, it should be part of the plan - not the plan itself. We generally model a conservative inheritance scenario while also showing what retirement looks like without it," said Scott Bishop, financial adviser, partner and managing director at Presidio Wealth Partners.

The Great Wealth Transfer also has the potential to increase income inequality in the U.S.

"There's the risk of the 'haves' and the 'have-nots' getting further divided," Schulz said. "Generational wealth has such an enormous impact on our lives and our futures. If you have no inheritance, it's an entirely different ballgame. Unfortunately, this wealth transfer could increase inequality."

Schulz said it's important to talk to parents about their finances even when such talks can be uncomfortable or even taboo in your family. Ultimately, you want to make sure they have enough to sustain their needs throughout a potentially long life so that you can determine if you'll need to help them financially in their older years.

"Have an understanding of your parents' finances long before an inheritance ever comes around," Schulz said. "More likely than not, you'll have to help your parents financially rather than getting an inheritance."

-Jessica Hall