How do I plan for retirement when I don’t know what I’ll inherit?

My father is 92. He’s in reasonable health, and we hope he has several more years ahead of him. My husband and I are planning our retirement, and we don’t know how to think about my future inheritance. I am an only child and Dad owns his house in Sydney and has some investments, though I have no idea what they are worth.

If we ignore the inheritance entirely, then our retirement spending needs to be fairly tight. If we allow for something coming in, then we could afford to do more travel and perhaps buy a caravan to do the grey nomad thing. My husband has some health issues, and I’m concerned that if we wait until Dad passes away to do these things, we won’t have the mobility to be able to enjoy our retirement.

How do you advise people to think about inheritances when the timing and amount are so uncertain?

Not knowing what your share of the inheritance will be can make planning for retirement difficult.Credit: Simon Letch

It can be difficult among families to have these types of discussions, but if possible, talk to your dad about what he plans to do with his estate. Is he leaving everything to you? It is becoming more and more common to leave money to grandchildren. Or he may have a charity in mind that he wishes to support.

As an only child, you are probably the executor for his will, which means there is even more reason for you to understand his wishes. If he has a financial planner that he has worked with, perhaps the three of you could sit down together and the adviser could take you through your father’s financial position.

This could also be helpful if one day he loses competency, or needs to go into care. You may, for instance, need to arrange care funding, and an understanding of his financial position would be essential.

As to planning for your and your husband’s retirement, we typically would make a conservative estimate around an inheritance within our financial modelling. As you point out, to ignore it completely would be comparable to sticking your head in the sand.

The key is just to be very conservative with the dollar amount that you would anticipate inheriting, and the time frame for when these monies might arrive.

I am 61 and work part-time. I am already making the maximum allowable salary-sacrifice super contributions. Is there any benefit to me in getting into a transition-to-retirement scheme via my super? I don’t need extra income from super.

Thanks for your question. I can see no benefit in you commencing a transition-to-retirement (TTR) pension given the circumstances you briefly describe here.

Tax applied to the earnings of transition-to-retirement pensions is identical to that applied in your current accumulation phase. Originally, TTR pensions received the same generous tax treatment as account-based pensions (0 per cent tax on earnings and capital gains up to the transfer balance cap), making them a far more compelling proposition.

Today, however, unless you can use the compulsory pension that must be drawn from your savings in some productive way, typically by making salary-sacrifice contributions back into superannuation, then there is no benefit to be gained.

Indeed, the TTR pension would see your superannuation savings depleted due to the obligation to take pension drawings, which would then reduce the amount you could ultimately get into a tax-free pension upon retirement. In this circumstance, a TTR pension has made you worse off.

Paul Benson is a certified financial planner at Guidance Financial Services. He hosts the What’s Possible? and Financial Autonomy podcasts. Questions to: [e-mail]

• Advice given in this article is general in nature and is not intended to influence readers’ decisions about investing or financial products. They should always seek their own professional advice that takes into account their own personal circumstances before making financial decisions.

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