This year, the first of Australia’s 4.2 million baby boomers will be turning 65, with many of them considering retirement. After several decades of hard work and dedicated investment and savings, many have planned for a relaxing and comfortable lifestyle in retirement.
Nearly all baby boomers have children of their own, who as adults, are working, raising children and trying to maintain their financial commitments as their parents did.
Times have changed however as there are some notable differences with raising a family today, when compared to the baby boomer era.
The main difference relates to a considerable increase in the cost if living. This has mainly been due to the sharp increase in housing prices over the last 10-15 years, leading to almost unsustainable mortgage debt. When you combine this debt pressure with an increase in the cost of living, including the cost of education, it has become common practice for both parents to be involved in the work force.
Divorce rates have also been on the increase over the years leading to a larger number of single parent families. Working parents do have the option of child care, however this additional cost significantly reduces earnings, questioning the decision to work in the first place.
The financial wheels fall off when a parent is no longer able to work due to serious illness, injury or premature death. This is because 95% of families don’t have adequate levels of personal insurance in place to prevent financial hardship. Statistics show that 1 in 5 families are at risk, leaving them with no choice but to rely on financial assistance from their parents.
As parents, naturally you will do what you can to ensure both your children and grandchildren are looked after and supported at their time of need. The problem that now exists is that income or savings that were set aside for retirement, are now being used to financially support your children or grandchildren, whether it be short, medium or long term.
The three options that exist at this stage include:
- Delaying retirement and working longer
- Cutting back on your standard of living if you have already retired
- Stop the financial support being offered by the family.
There is another option that is both the simplest and most cost effective way to ensure that you avoid the above scenarios.
Speak to your children and ask them if they have adequate personal insurance in place! This will ensure that they can meet their financial commitments and maintain their standard of living, should serious illness, injury or premature death occur.
If they have considered personal insurance however are on a tight budget, offer to assist or pay for the premiums yourselves. I can guarantee you the cost of the premium will be insignificant compared to the ongoing cost of financially looking after your children or grandchildren!
For example, a 40 year old white collar male non smoker earning $50,000 per year, can take out $500,000 in life cover and protect his income against illness or injury up to age 65 for less than $1,000 per year, with the bulk of the cost being tax deductible!
Personal insurance doesn’t have to be complicated or expensive, however it does needs to be organised prior to serious illness, injury or premature death occurring in order for you to financially protect your retirement!
If the above scenario matches your situation in anyway, please discuss it with your children and encourage them to seek advice in this area. Likewise please leave a comment below as I would be more than happy to offer valuable guidance or assistance in relation to your personal circumstances.
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General Advice Warning
The Information on this page has not taken into account your financial situation, needs or objectives. Before acting upon any advice, you should consider whether it is appropriate for you.