Protect Your Retirement From Your Kids

Posted by AFRM on 24 November 2015

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You’ve worked hard, saved and made plans for your retirement. You may have planned to buy a new car, renovate the house or travel overseas or around Australia. These are the plans of many of us on the verge of retirement. 

Imagine you’ve just packed your suitcase and are about to head to Europe, enjoying the fruits of all your hard work, when you receive a phone call from your daughter. She tells you she has just been diagnosed with a serious illness. She has two young children and will have to stop work. Are you going to tell her that it’s up to her, or will you dig into your own savings to help?

We all want the best for our kids and to support them during any difficult times. But this support could come at the price of your retirement savings. What would you do if one of your children was unable to work due to illness or an accident? How would your retirement plans change if you suddenly had to care for a child or grandchildren?

 We all think it wouldn’t happen to us, but statistics show that:

  • In Australia one in five parents will become too sick or injured to work, or will die before retirement age
  • Around 22,500 Australian grandparents are looking after their grandchildren+
  • The typical Australian family will lose half of their income following a serious illness, injury or the loss of one parent due to underinsurance

The best way to protect both your family and your retirement plans is to ensure your children have personal insurance protection.

As well as providing financial protection, personal insurance can also:

  • Give you and your family peace of mind
  • Allow you to focus on providing emotional support
  • Prevent you from sacrificing your retirement plans

It is often when a problem starts that we realise it is too late to do something about it. Retirees should feel confident that their children have the right level of income protection cover, so they won’t be relied on should the worst happen.

The recent Rice Warner report on underinsurance in Australia* showed that for a typical middle-income Australian family with two children $680,000 is the amount of life insurance needed. However, $258,000 is the current median level of insurance in Australia, which is not enough.

Think about this…

  • If your children suffered a serious illness or accident and couldn’t work for an extended period, how would they cope financially?
  • If your child was to die unexpectedly, who would take care of the debts or provide for their family?
  • If you had to help out financially, what would it mean for your own financial situation – both now and in retirement?

Getting your children to take out the right insurance protection isn’t necessarily an easy and straightforward conversation. It can be worth speaking to your financial adviser about the best way to discuss this sensitive topic.

Some retirees even consider funding the policy premiums themselves, to ensure their retirement savings are safe. This allows retirees to maintain their financial retirement goals and reduce future financial stress. They have knowledge that their children also have financial flexibility to support themselves through the insurance they now have in place.

We can review your children’s cover to give you peace of mind. Contact us today. 

+ Source: Australian Bureau of Statistics 4102.0, Australian Social Trends, Family Functioning: Grandparents raising their grandchildren, (ABS, 2005)
*Source: RiceWarner -
A version of this article first appeared in the ipac October 2015 e-newsletter. 
Please note, this information has been prepared by Australian Financial Risk Management Pty Ltd (AFRM) ABN 21 001 696 868. AFRM hold an Australian Financial Services License (AFSL) 237186. The information is for general purposes only and has been prepared without taking account of your objectives, financial situation or needs. AFRM recommends that you seek professional advice before acting on any information contained herein.