You’ve probably seen those ads for retirement planning featuring retirees on Harley Davidsons saying “Retirement is payback time” or have seen the stickers on the caravans of the grey nomads that say “I’m spending my children’s inheritance.” Or even better, “Live long enough to be a burden on your children”.

We have probably all laughed at that and thought not in my family, I don’t need to plan for retirement, I will get what my parents or grandparents don’t spend.  The 2004 Survey of Consumer Finances noted that 21% of people born after 1964 thought they would inherit some money someday. After all, most of them still have living parents or grandparents.  I am not sure what the numbers are here in Australia, but I would expect them to be comparable.

So what’s the reality?

Well retirees have a lot of demands on their savings. Living costs, for one, are rising fast. At the same time, many people are not waiting until they die to help their children and grandchildren financially. Finaly the current market turmoil is seeing many people concerned about how long their retirement savings will actually last.

So for these reasons, I come up with 5 reasons why people born after 1964 (and this includes me), need to take accountability for their financial health and no rely on Mum and Dad bailing you out again

1. People who make it to 65 will live a lot longer. Modern medical advancements will simply keep us alive a lot longer. At age 65, the average male has a life expectancy of 18 years and an average female has a life expectancy of 21 years That’s a combined 39 years of living expenses for couples, and it isn’t easy or fun to scale back your standard of living.
2. Social Security will probably change. There is not too many people who think that the government will be paying out more in the future that it currently does now. With the talk about keeping people in the work force for even longer, there is even the chance that you may have to wait longer to qualify for a benefit.
3. Marriage Breakdowns. It is not unusual for a couple to divorce in retirement. After years of being together, they sometimes find in retirement that they have grown apart and simply want to go their own ways. As a result the family fortune is split sooner and between the living parents. Splitting up can be expensive in itself, and maintaining two households for decades afterward will often cost more than sharing a dwelling.
4. The desire to unlock a home’s equity to meet lifestyle and other costs. The good old reverse mortgage. The reality is that homeowners can tap into the equity in their home without the need to repay it until the house is sold at their death.
5. There is also the view that the transfer of wealth will increasingly happen while the older generations are still alive. People in the latter halves of their lives now find themselves school fees and university fees for grandchildren. Indeed we have seen people who have been helping their children and grandchildren out with home deposits and even simply bailing them out of mounting debts and a host of other financial calamities.

So that’s some reasons why waiting for the folks to pass it on may not be a smart idea.  It may be that now is the time for you to work out an alternative plan just in case this one does not work for you after all.

Please Note:

This publication has been prepared to provide you with general information only. It is not intended to take the place of professional advice and you should not take action on specific issues in reliance on this information. In preparing this information, we did not take into account the investment objectives, financial situation or particular needs of any particular person. Before making an investment decision, you need to consider (with or without the assistance of an adviser) whether this information is appropriate to your needs, objectives and circumstances. This information is provided for persons in Australia only and is not provided for the use of any person who is in any other country.

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