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Don't let your kids ruin your retirement

Adult children are becoming more and more of a burden on their parents during retirement, but they needn’t be.

Many baby boomers are understandably concerned about how they will fund their retirement.

The Federal Government has made no secret of the fact it expects older Australians to increasingly shoulder their own aged care, and Treasurer Joe Hockey has already flagged a future in which many of us will be still working at 70.

Research released in February by ING Direct shows Australians are turning to property, savings, and even inheritance money to fund their retirement, as many doubt their superannuation will be sufficient.

Members of Gen Y, for example, expect their retirement to come from savings (20 per cent), property investments (13.2 per cent), and inheritance (7.1 per cent).

But will there be any money left to inherit, or more importantly, should there be?

Should baby boomers cut off their children once they fly the coop in order to look after their (increasingly expensive) later years?

We have noticed a huge increase in baby boomer parents who have been forced into helping their adult children. We have seen situations where adult men, or sometimes women, have been forced to move back in with their parents after a divorce. If you have three children, then statistically one may get a divorce and that is expensive these days.

The fact is that children aged between 37 and 50 are becoming a real financial problem for their parents.

The job market is also very cut-throat and if someone loses a good job that pays well, it isn’t so easy to find another. They are servicing a huge mortgage and they may find themselves redundant and no longer able to service that mortgage, which is where the parents step in.

While divorce occurred during the baby boomers’ hey-day, it was nowhere near as financially ruinous. Which is why so many parents are dipping into their super to help pay their children’s mortgage or rent.

The property problem

So, clearly Gen X and Gen Y are having their parents on, right? That depends on how you look at it. It is a lot harder to pay off a house these days and that needs to be considered. The children of baby boomers need a measure of sympathy in this regard.

When baby boomers were purchasing their first home it was priced at about three times the average wage. These days it is between 8 and 9 times the average wage so it is a lot harder.

Help, but don’t do it for them

The tough property market does not mean, however, that baby boomers need to sacrifice their own retirement incomes. There is nothing wrong with wanting to see your child get on the property ladder, but there are many ways to do this and we are not a fan of cash-in-hand.

There are things you can do that won’t affect your own retirement income as much, such as going guarantor for their house deposit. There are associated risks but for many this is a much better solution.

We need to draw a distinction between helping out for a period of time during major life upheavals – such as divorce – and adult children who habitually run to mum and dad, for a handout!

With credit is so widely available it is so easy to get into a financial mess. If your child is always coming to you because they can’t pay the phone bill then you can help them get their life on track by giving advice but I wouldn’t be just reaching into your pocket. If all else fails, you can always take your grown-up child to us to seek some appropriate advice?

In closing the best thing you can do is teach them financial literacy from an early age so they are not coming to you because they forgot to take out insurance and they just crashed their car!

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