Forecasting your family's future
By Laura McGeoch. This article orginially appeared in the Good Weekend.
Most of us don’t have to look far to see that modern Australian families encompass more than the traditional form of mum, dad and a couple of kids.
The Australian Bureau of Statistics says there have been considerable changes to our family dynamics in the past 25 years, with the traditional family unit making up only 45 per cent of the 6 million families in Australia. This has declined from 54 per cent in 1991. In that same period, single-parent families grew from 13 per cent to 16 per cent of all families.
On a smaller scale there are blended families – in which two people come together with children from previous relationships and go on to have children together – and stepfamilies, as well as families with same-sex couples as parents.
"Just as the types of households and life stages are far more diverse these days, retirement planning has to be pretty flexible and adaptive,” says social researcher and demographer Mark McCrindle.
However, he says one change is affecting the retirement plans of all types of families with children: parents are financially responsible for their children for longer, often into their adult years. This includes couples who may have had children later, and are raising them beyond their 50s, or have adult children living at home burdened with student debt and finding it hard to afford to rent or buy in an expensive property market.
“It’s not unusual for people in their late 50s who are thinking very seriously about retirement or downshifting from full-time roles to still have dependants,” McCrindle says. This means would-be empty-nesters are delaying downsizing their family home and any opportunity to invest excess money from the sale, he says.
Pressure to help adult children is a challenge for older Australians
Pressure to help adult children financially, especially with buying a property, is a big challenge for older Australians, many of whom “just can’t afford to give away large sums of money”, says Laura Menschik, a director at WLM Financial Services. The risk is that they leave themselves with little for their own retirement.
Retirement planning and intergenerational wealth transfer are emotive and complex issues for all families. Yet they can become even more complicated in blended families and stepfamilies, Menschik says.
Blended and stepfamilies should resist putting retirement planning off
Blended households make up 3.7 per cent of Australian families, while stepfamilies account for 6.4 per cent. Menschik says couples in these households should resist putting retirement planning in the too-hard basket. “They need to sit down with a clean slate and work out what each brings to the relationship, and also what they want to happen in the future,” she says. As well as financial concerns, such as paying for education, they need to agree on living arrangements, including what would happen if one or both of the parents in the new couple were to die or become disabled.
Retirement planning for same-sex couples has become easier
Menschik says planning for a post-working life has become easier for same-sex couples with children. This is because of improved legal rights, such as same-sex marriage and being able to nominate a same-sex partner as a superannuation beneficiary.
Single parents continue to face challenges
However, single parents face the challenge of planning a retirement with only one income. And while, as McCrindle notes, the divorce rate is generally declining, it has increased slightly among those aged 65 and over. “This is where the idea of ‘un-retirement’ comes in,” he says. “Where someone was retired but suddenly needs to go back to work.
Or perhaps they’re moving from a couples pension to a singles pension.” When it comes to divorce at an older age, Menschik adds that women who haven’t been the main breadwinners and who weren’t across the couple’s finances often come off worse in this scenario.
Composition of Australian families continue to evolve
Looking ahead, the composition of Australian families is expected to continue to evolve. The Australian Bureau of Statistics predicts that by 2029 the most common type of family will be couples without children.
These couples will accumulate much more wealth for retirement, McCrindle says. Whatever your family situation, there is no room for complacency, says Menschik, who argues retirement planning should start as early as possible. “When you’ve got a plan, you can always go back and revisit it,” she says. “But at least you can relax a bit.