Updated November 12th 2013

Most financial advice that is provided to the baby boomer generation has commonly been focused on retirement planning. However, one of the biggest risks to the financial plans of retirees is ‘Family Risk’ ie; the impact that the death or disability of a family member could have on their retirement savings.

This subject is not a nice one to broach, and it’s understandable that no-one wants to think about something bad happening to their child, no matter what age.

However, ensuring adequate insurance is in place on adult children, and their spouses, can alleviate the need to step-in and provide financial support to the surviving family. Even if the injury or illness is not permanent, funding treatment and rehabilitation costs, maintaining mortgage repayments and ensuring that family needs are met, can cause extraordinary financial stress from a one off medical event (cancer, stroke, heart attack, or serious injury). Some of the impacts are broken down below.

The Statistics

The number of Australian families in which grandparents are the guardians of their grandchildren continues to be in the tens of thousands (22,500 families were recorded in 2003, and this number is sure to have risen in the last decade).

A federal government study in 2009 estimated that it costs an average of $384,543 to raise a child to 18. However, according to social researcher Mark McCrindle, the cost jumps to $1,028,093 once the cost of private tutoring, sports and dance activities, and electronics are factored in.

Another important consideration is the average size for a mortgage. In NSW for 2010, the average mortgage was $397,029. Again, without adequate life insurance, the financial burden will fall to the parents if they don’t want the banks to foreclose on their child’s house.

Key Points

Grandparents, parents and children need to be included in the retirement planning equation as everyone’s health and wellbeing will affect the others’ future goals and the likeliness of these coming to fruition.

It really is a case of ‘Hope for the best , prepare for the worst ‘.

  • 1. The younger you are, generally, the cheaper it will be. Being young and healthy means that it’s going to cost less to get a policy in place; the older someone is the more likely they will actually need the cover, meaning it will cost more to get insured.
  • 2. Debt Protection: A life insurance policy can provide the financial assistance to help the surviving spouse or their family to partially or completely pay off the debt.
  • 3. Disease Doesn’t Discriminate: Life is unpredictable and no matter how healthy a person may seem, how devoid a family history is of disease or illness, things can always take an unexpected twist and life can change in the blink of an eye. Having life insurance, no matter how young someone is, can help act as a security blanket just in case something bad does happen.

Baby boomers should have a discussion with their family on this subject to ensure that not only are their adult children and their families protected, but also that their personal retirement plans are safeguarded. It is in everyone’s best interest to prepare for unplanned events in their lives.