Financial uncertainty throws retirement plans into jeopardy

“Sacrificing one’s own retirement savings to assist elderly parents has the potential to develop into a cycle where the retirement plans of the children are also threatened,” Mr Speechley warned.

In these sorts of circumstances, Mr Speechley said hard numbers are needed in order to assess the situation properly.

“Developing a budget spreadsheet of your parents’ expenses and income will enable you to see exactly where they stand financially, and how long their money is likely to last,” he explained.

“It’s important to include the financial consequences of COVID-19 and how this has impacted superannuation balances and investments. If there is a deficiency in their income, they might want to consider professional financial advice. This may include setting up an emergency fund to cover medical expenses, and they could consider downsizing from the family home.”

Clients who are supporting their elderly parents, he said, also need to identify how much they need in retirement and whether they’re on track to meet it by using a retirement calculator.

“One of the most important things you can do — as children — is to ensure that your parents have appropriate insurance,” he said.

“If you don’t invest in financially protecting your parents now, you may end up having to cover basic retirement expenses later on.”

Mr Speechley pointed out that while parents may want to retain their independence in retirement, at some point, assisted care may become necessary.

“Retirement homes and assisted living facilities can be expensive, so if this isn’t going to fit within your budget, you may need to consider other options,” he said.

“One option could be that they move in with you or a sibling, for instance. You may also want to investigate whether they meet the requirements for government-funded housing support.”