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Make retirement gold

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The years when the children have left home and you have eased into retirement can be amongst the most rewarding of your whole life. You may be debt free and can concentrate on spending more time with the family, or perhaps taking the European holiday you always dreamed about.

While these are referred to as the ‘golden years’, retirees are still parents (and grandparents) and chances are you want to do what you can to help your loved ones, should the unforeseen happen.

No one wants to imagine their adult children getting sick but if they were to suffer a serious health trauma and did not have adequate insurance in place to look after them, it could mean dipping into your retirement nest egg – the money that needs to last the rest of your life – to help them out.

The lack of insurance of your dependents presents a potential catastrophic risk to the retirement savings of their retiree parents and to the young adults themselves.

Zurich’s recent whitepaper ‘The Life Insurance Literacy Gap’ reveals that by generation, Gen Y consumers are the most likely to rate their life insurance knowledge as poor or very poor (37.4%), while their Baby Boomers parents or grandparents are the most likely to rate their knowledge as strong or very strong (22.0%).

The research also shows young Australians significantly overestimate the cost of life insurance, which is leading to an over-reliance on their super fund’s default cover. This means they are also likely to be underinsured for the amounts they will actually need to financially support themselves, without assistance from their parents in the event of serious accident or disability.

Unsurprisingly, a growing number of retirees are seeking to preserve their retirement savings against such a risk, by taking out cover on their adult children – especially against serious health trauma or loss of income.

And while everyone’s circumstances are different and there will be different needs depending on existing debt levels and income needs, there remain some fundamental factors that need to be considered:

  • What type or combination of insurance is needed?
  • What tax and ownership structure is most appropriate?
  • What amount of cover is required?
  • How can the cover be financed?

These are complex questions and it is important is to stress that you should seek advice from a qualified financial planner to properly craft the right solution for you and your family that also strikes the right balance – providing just enough financial support to ensure your child or children are happy, productive and self-sufficient, without undermining your own financial future.

Contribution by Zurich Financial Services

Important Information: The content of this publication are the opinions of the writer and is intended as general information only which does not take into account the personal investment objectives, financial situation or needs of any person. It is dated August 2015, is given in good faith and is derived from sources believed to be accurate as at this date, which may be subject to change. It should not be considered to be a comprehensive statement on any matter and should not be relied on as such. Neither Zurich Australia Limited ABN 92 000 010 195 AFSL 232510, nor Zurich Investment Management Limited ABN 56 063 278 400 AFSL 232511 of 5 Blue Street North Sydney NSW 2060, nor any of its related entities, employees or directors (Zurich) give any warranty of reliability or accuracy nor accept any responsibility arising in any way including by reason of negligence for errors and omissions. Zurich recommends investors seek advice from appropriately qualified financial advisers. Zurich and its related entities receive remuneration such as fees, charges and premiums for the financial products which they issue. Details of these payments can be found in the relevant fund Product Disclosure Statement. No part of this document may be reproduced without prior written permission from Zurich CLYH-010419-2015