Providing enough resources for your children while taking care of your own financial future can be a difficult balancing act, according to Heather Bell, Business Development Manager, Just SA.
Many parents would like to leave for their children, but this is not always feasible, especially during tough economic times when finances are stretched.
Bell said that it’s important for parents to prioritise their own financial futures so they don’t become a financial burden on their children when they get older.
Life is expensive, which makes saving for retirement difficult. Not having enough money saved for retirement, people run the risk of not having enough money in retirement, increasing the possibility of leaning on their children to help with expenses.
It is important that people find balance between looking after themselves and looking after their children.
Even if your children won’t mind looking after you in your golden years, having financial independence is empowering and can lead to less stress in your relationships with your adult children," Bell said.
It is essential that people work with a financial adviser to regularly assess their current personal financial situation and revisit their retirement goals as their lifestyle changes.
People need to keep in mind the general rule of thumb which is:
To plan to have enough income to support themselves in retirement for about 30 years—to age 95 if they are men and age 100 if they are women, as females tend to live longer.
Bell said: "Parents should rather focus on reducing their risk of depending on their loved ones in their golden years. Once you know you have enough, then any additional funds or assets you might have can go to your children."
When you retire, retirement legislation requires that you use at least two thirds of your savings to buy an income-generating product, such as a life insurance policy or a living annuity.
There are pros and cons involved, and it is important to assess all your options, preferably with a financial adviser, to ensure you make an informed decision.
IOL Business