Underinsured Adult Children Impacting Their Parents' Retirement.

A serious illness, injury or death of an adult child – that is, a child aged over 18 – can have a major negative impact on the retirement plans of parents.

Traditionally, the closer you get to retirement age, the larger the focus on retirement planning and an appropriate level of income in your retirement, as well as wealth protection through life insurance.

Regrettably, there has been little focus on how this retirement planning could be affected following the death or disability of an adult child.

It’s important for parents to consider what would happen if their adult child, who may be working full time or studying and working part time, becomes totally and permanently disabled.

Imagine this: Nathan, aged 24, has recently begun his first job after completing tertiary studies, and is seriously injured in a car accident. Obviously, Nathan’s parents will want to provide for their son in every way possible. However, without Nathan having adequate insurance cover (both life and health insurance) the financial burden will fall on his parents and could have a substantial impact on their retirement savings.

It is one thing to provide for a child with a major disability, and another to provide for a child who has a partner and children of their own – especially if they are the main breadwinner in the household. – if that child were to pass away, become permanently disabled or suffer a critical illness.

It is important for discussions to take place with Adult children… Do they have jobs, debts, or families of their own? Are they the main breadwinner? Do they have adequate insurance to cover labilities and provide for their families? Have parents guaranteed any loans?

These discussions could lead to a comprehensive insurance strategy for adult children, partially or fully funded by the parents, protecting not only the adult children but also safeguarding the retirement plans of the parents.