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Have You Been Sacrificing Your Retirement For Your Adult Children?

As cost of living is rising, it’s natural to want to give your children a helping hand financially.


44% of Australian parents feel the need to assist their adult children financially according to Finder.com. As well as helping out with expenses like university fees and bills etc., parents have been providing a leg-up into the housing market.


It’s completely natural to want financial security for your children regardless of their age, but it might be possible to do so without sacrificing your retirement situation.

Here’s what you’ll need to consider:


Retirement savings


Are you already retired? Withdrawing a lump sum can potentially reduce your pension payments, or erode your savings all together. No one wants to face the reality of outliving our savings.

Are you approaching retirement? Deviating from your retirement strategy could have dire consequences as the opportunity for you to accumulate much more superannuation savings is limited.


Gifting and loaning


Gifting cash to family carries no tax implications, unlike gifting assets such as property or shares as the Australian Tax Office (ATO) considers it the same as you selling the asset which could attract capital gains tax.


If you gift money or assets while receiving government benefits, the gift may still count towards your income and assets tests leaving you worse off if the amount of your benefit includes assets you no longer own.


Here are some reasons why lending rather than gifting could be beneficial:

  • It’s not poor parenting to consider your own needs too!

  • Children can become dependent on additional money; there’s a difference between supporting your child’s lifestyle and enabling it.

  • Some children come to expect handouts from the Bank of Mum and Dad. Giving them a helping hand, but ensuring you teach them independence is important. A loan should be a once-off, potentially with interest.

  • If you have more than one child, you may seem like you are favouring one over the other. Remove this risk by setting up and agreeing on a repayment plan.


The legalities


When lending money to children, it’s important to document the details and have all parties in agreement to avoid any issues that may occur in the future.


Wanting to help your children is completely natural, and there is a good chance you’ll always feel responsible for their wellbeing. However, you need to make sure you think of yours too – you have earnt your retirement!


Discussing your needs with a financial advisor will help you be able to set realistic retirement goals which could include helping your children.


Nobody wins if you outlive your money, so plan today for what you’ll need in the future.