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Financial Planning Across The Generations
1 December 2020

Every generation thinks life will be different – and of course, each one is right – but when it comes to planning for the future, while we’re young we have a habit of thinking there is still plenty of time. After all, when you’re in your mid-thirties or even early forties, retirement is still decades away; later if the government decides so!

Like anything forgotten too long, the years pass quickly and the time we could have used constructively has disappeared. For example, early Generation X is now on the countdown to retirement.

If you want to be different today, plan to be different tomorrow.

Typical Post-War Cohort

Let’s imagine grandparents, both in their eighties. It’s likely that Grandad started working in his teens and stayed with one employer for most of his life. Structured superannuation was available to the very few. He retired at 55. Grandma may not have had much paid employment, if any. Their lives can be broken into three phases – education, work and leisure.

But they didn’t anticipate retirement being as long as it’s turned out to be. They’re still healthy, have outlived their savings and are relying solely on the age pension to fund their frugal lifestyle.

Typical Baby Boomers

Maybe in their sixties right now, they were better educated than their parents and both worked; though Mum took years off to raise the kids. They accumulated quite a bit of superannuation; Dad has more than Mum.

Their lives can be broken into the same three phases. Education may have extended into their early twenties or they studied later during their working lives. They worked for a couple of employers and, thanks to technology, ended up in careers they never imagined in their youth.

Whilst they have long talked about retirement, now that it’s almost here they face it with some trepidation. They may consider moving to part-time work that will give them more freedom, keep their minds stimulated and still have enough to pay the bills. After all, now they are independent and the mortgage is paid off, life is cheaper.

It would be nice to have more time to travel and do the things they would like to do. They’re both fit and healthy and if they live as long as their parents that will be 20 or 25 years of leisure.

Will they have enough money to live a comfortable lifestyle for that long? Many of the things we take for granted have emerged because of the demands or needs of the Baby Boomer generation. At each stage in their lives, they have transformed the issues that were important to them at that age.

  • As teenagers they transformed the music industry with Rock n Roll and the food industry with fast foods and eating out.
  • As young adults, they transformed the fashion industry and redefined gender roles and practices.
  • In jobs, Boomers transformed workplaces with maternity leave, flexitime and other work-balance innovations.
  • When they had children, they transformed parenting and the education system.
  • As they got older, they revolutionised health care and made technology an everyday part of life.
  • As retirement got closer, they pushed for changes in investment products and aged care.

Some observers have suggested many Baby Boomers may “retire retirement” as an outdated model. Boomers tend to be much fitter and healthier than their parents were at the same age and the prospect of 20+ years of leisure lacks purpose and affordability. A trend may emerge for Boomers to continue working but in a more flexible way with breaks for “retirement activities”.

A key danger for baby boomers may be that age pension entitlements may not continue to be as generous as they are for their parents. It is imperative that you make the most of your accumulated wealth in order to supplement it.

Typical Gen X

They are unlikely to rely on one employer or one lifetime career. Balancing life and work is more important as taking time off to travel, doing volunteer work or trying new adventures earlier in life. And being so versatile, when they resume their career they simply re-train.

What this means is that they will have multiple periods of education-work-leisure in your life, and as they will probably be much healthier than previous generations they don’t see working longer as a problem.

But will they be able to afford 20 or 30 years with no income? That’s a sobering thought at any age.

It’s time to be different now.

Many social commentators class Generation X as stuck in between the two “noisier” and more well-known generations – Baby Boomers and Gen Y – but that doesn’t mean they fade into insignificance. They need to be the first generation to truly take control of retirement at a younger age. Stop the trend and talk to Hudson about the many strategies available to give your retirement savings the boost it needs.

Sandwich Generation (not confined to an age bracket)

The Sandwich Generation refers to people who are ‘sandwiched’ between caring for elderly parents and adult children still living in the family home.

As a society we are living longer but unfortunately longevity comes at a cost. It’s not uncommon for older people to become the primary carer for elderly parents. Caring for someone is difficult emotionally, but can also affect the household finances as work hours are reduced or careers cut short to accommodate carer responsibilities.

At the other end of the spectrum, adult children pursuing higher education are continuing to live in the family home longer than previous generations as the costs associated with moving out prohibit them from achieving their independence.

Either situation can create additional financial pressures

People with elderly parents and adult children all living in the one home, often find themselves in an unexpected financial situation. At a life stage when most are planning to downsize their homes, the Sandwich Generation is forced to consider other options such as renovating to increase space or provide more privacy.

No longer are “Granny flats” inhabited by older family members; now it’s the kids who have taken over these coveted domains.

Of the three generations potentially living under these arrangements, only one is usually in the position to pay for expansions, yet the retirement strategies of these people hadn’t anticipated issues such as late-life mortgages.

For those already in this situation, a range of government services is available. Contact My Aged Care on 1800 200 422 or visit www.myagedcare.gov.au

Looking ahead

Financial advisers are helping a growing number of clients create strategies for managing these future financial pressures. Already highlighted is a current lack of trauma and disability insurance. This will provide a lump sum to cover costs if a critical illness is brought on by the extra stress of these situations, placing the in-between generation in a better position to manage this phase financially and emotionally.

Other strategies to start considering now include:

  • dollar cost averaging to grow savings,
  • increasing superannuation contributions,
  • nominating superannuation beneficiaries,
  • establishing powers of attorney and maintaining wills.

Your financial adviser can discuss these and other individual strategies with you to determine the most appropriate for your current situation and your future needs.

As housing costs increase and we continue to live longer, the pressures of multi-generational accommodation will affect today’s younger generations, tomorrow.

The key to achieving financial security is planning. Speak to your financial adviser about the right strategy for you; it’s never too early, and it’s certainly never too late.





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