How secure are your retirement plans?
If you’re approaching retirement, you may often be reflective on how life is going to treat you on the health and financial fronts. This reflection is confronting and challenging enough by itself.
Probably the last thing you’d expect to cope with upon retiring from the permanent workforce would be taking on a parental role again, but for around 22,500* Australians this is something they’re already experiencing.
If something happened to your son or daughter, like many Australians you’d likely want to make sure your grandchildren were looked after financially, whether you became the legal guardian or played a supportive role.
A growing concern
While financial worries wouldn’t be top of mind during such family trauma, if your child hasn’t planned ahead there could be financial pressure on your own retirement funds.
By investing in Life and/or Total and Permanent Disability insurance, your child can make sure the financial pressure of raising their children is eased on those whom their own normal parental responsibilities may be defferred to.
With Life and/or Total and Permanent Disability insurance in place and providing a financial safety net of sorts … you can focus on providing the emotional support and family structure often needed to stabilise your grandchildren’s home life.
The cold hard facts
- An adequate standard of living in retirement requires 70-80% of pre-retirement expenditure. †
- Baby boomers are expected to live, on average, some seven years longer than their parents. ‡
- 20% of baby Boomers will probably inherit very little or nothing at all. ‡
- ‘Cancer has overtaken cardiovascular disease as the leading cause of burden.’ §
Start the conversation
So while talking to your grown, self-sufficient child about their financial obligations is difficult, you owe it to yourself and your grandchildren to start the conversation as early as possible.
Here are some statistics to help you with the conversation.
- To raise two children from birth to age 21 can cost $537,000, which would put a serious dent in your retirement nest-egg.
- Food, housing, health, education and clothing take up 55% of the total cost of raising two children for middle income families.
- The costs of recreation, transport, fuel and power accumulate to just over $134,000, with food amounting to $107,800 to raise two children.
- You may find you can’t get State education allowances or ‘school cards’.
- If you’re a self-funded retiree (or still in the workforce) Centrelink’s means tests may result in you not being eligible for any family support payment.
“At a time when individuals are increasingly expected to self-fund in retirement, Baby Boomers have become the ‘bunnies’, caught in a situation in which they are being asked to do something they do not have the capacity to do.”
Source: The Australia Institute; Rich Boomer, Poor Boomer, 2006.
An illustrative case study of David and Susan Jones
David was 15 when he started an apprenticeship at his local steel works. Forty years later, he was still working at the same factory.
His wife Susan has kept the family ticking along, having raised four children to become independent adults with their own families.
After a company restructure was announced, David took the opportunity to ask for a redundancy and succeeded in getting a healthy redundancy package. This, together with his superannuation and accumulated benefits, meant David and Susan were sitting pretty for an early retirement.
Both David and Susan viewed this as a great opportunity to enjoy time with their grandchildren and to travel around Australia.
On Boxing Day of that year, David’s eldest son Rodney had a massive brain haemorrhage and passed away.
And, because he was young and didn’t see the need for any life insurance, Rodney left his wife and three children without any means of support.
As any parent or grandparent would, David & Susan took in Erin and the kids into the family home.
The unplanned financial impact on David, Susan and their retirement plans was devastating and they were unable to do most of the things that they had hoped 40 years of work would allow them to do.
“What should I do?”
Speak to your loved ones … have that conversation that many think will be difficult, but find out after the initial uncomfortable steps provides much reassurance and a stronger family bond.
Seek advice from your financial adviser about the best way to protect and manage the financial future of both you and your loved ones.
Organise a family meeting where your financial adviser could be present and facilitate discussions, you may not feel comfortable enough to explore alone.
One solution developed from previous family meetings, was an offer for the Granparents to have increased security for their own retirement by offering to partly pay for their child’s insurance while they weren’t in a position to do so themselves.
* ABS: Family Characteristics, Australia, 2003.
† The Australia Institute; Rich Boomer, Poor Boomer, 2006.
‡ NATSEM, Wealth and inheritance, 2003.
§ Australian Institute of Health and Welfare, 2007.
║NATSEM, Australian child costs in 2007.
¶ Australian Institute of family Studies, ‘Grandparents raising grandchildren - a new class of disadvantaged Australians, 2003.