Planners warned against using retirement funds to support adult children

Financial planners are increasingly providing intergenerational insurance advice for clients who are providing financial help to their children at the expense of their retirement nest egg, according to the Aviva distribution development manager, insurance, Russell Hannah.

The pressures of mortgages, providing for children’s education, and day-to-day living costs mean that the parents of young families weren’t able to afford an insurance policy, and if something happened to the family breadwinner, their parents were forced to step in to help the family financially, compromising their retirement nest egg, Hannah said.

As a result, financial planners were increasingly advising their clients to take out insurance for their adult children so if their children were made redundant, their family would remain financially secure.

“If you have a client who has worked to build an asset base for retirement, if they have children who have young kids and financial pressures, they need to make sure their kids are protected,” Hannah said.

In the absence of [an insurance policy], their retirement may be compromised in a bid to help their children, he added.

Parents and their adult children needed to discuss if they could both contribute to the insurance policy or if the parents would completely fund it, Hannah said.