When to Retire?

Babyboomers are postponing the decision when to retire because of the cost of bailing out their adult children. 

How long should the bank of Mum and Dad stay open?

There doesn't seem to be any signs of us pulling out of this recession any time soon. Those of us who still have adult children at home are finding it increasingly difficult to wave the day job goodbye.

We may have planned for retirement over the years by saving as much as we could, paying into some type of pension scheme whether it was private or company.

We may have put our house in order in preparation of the "big day" but the decision of when to retire seems to have been put on the back burner yet again because we didn't factor "a recession" into our calculations.

The Bank of Mum and Dad!

A recent article caught my eye in the 'Mail on Sunday' written by Anna Moore. It was titled 'Is the bank of M & D about to Crash? She warns that with the cost of bailing out our adult children rocketing, the Bank of Mum Dad is staying open longer ... but many parents are putting their own security at risk.'

She quoted some statistics which really brought it home to me how things have changed from what we expected from life and the expectations we had for our children and the stark reality.

As parents we want our children to be able to enjoy the things that we did. A good job, our own home, nice holidays and a reasonable standard of living. But with one million under 25's unemployed will our children ever get a job let alone the deposit for a home together.

We tend to think the biggest cost of children is going to be from birth to 18 but according to the Coventry Building Society we spend approximately £43,192 per child from the ages of 18-30.

They break this down with £8,415 on rent and £9,831 on housing deposits, followed by £10,722 on university fees, and that was before the rise in tuition fees.

Scottish Widows reports that one third of parents with adult children have given or loaned them more than £10,000 to help either with living expenses, paying off debt or to buy somewhere to live.

With this kind of expenditure going out to the kids instead of being directed into our pension savings what hope have we in making a decision of when to retire.  More and more of us will continue working to subsidise our adult children with all thoughts of when to retire being put on hold.

Are we being realistic?

There is no doubt that in economic terms, life will be much tougher for the next generation than it was for us. And what age will they be when they can make the decision when to retire?

Looking back to when we were young jobs were plentiful, housing was affordable, only a privileged few went on to university which was free with only books and living expenses to pay if we moved away from home. None of us started our adult life with huge debt like many of the graduates today.

A report by PricewaterhouseCoopers predicts that someone born in 1993 following the same career path can expect to be about 25 per cent poorer by the time they reach 65.

That's a scary thought. Which of us wouldn't want to help our kids out as much as we can. It seems we have no choice but to postpone retirement in an effort to help.

Can we afford to?

Professor Karen Pine, psychotherapist and co-author of financial advice book Sheconomics, thinks not. She sees it as a very worrying trend, a time bomb waiting to explode. In her research for Sheconomics, she reports coming across people who were cashing in their pension funds to provide their adult children with money for mortgages.

In fact if you look across the range of financial services offered by various Banks and Building Societies there are a number of packages aimed at the Bank of Mum and Dad encouraging them to stand as guarantors  with parents not realising exactly what they are committing to. 

Similarly there are offers of unsecured personal loans aimed at parents looking to raise a deposit to help their offspring get their foot on the property ladder.  But be warned there are risks in offering this kind of financial help to your offspring as it can seriously put your retirement funds in jeopardy.

In fact if you look across the range of financial services offered by various Banks and Building Societies there are a number of packages aimed at the Bank of Mum and Dad with offers of unsecured personal loans to parents looking to raise a deposit to help their offspring get a foot on the property ladder.

Another study by Prudential found that nearly a quarter of parents now expect to delay their decision of when to retire to at least 70 so that they can continue to help their children through university. While 29 per cent were dipping into savings, seven per cent had gone into debt because of it.

Abbey found that parents have withdrawn on average a fifth of their savings to help their adult children through the recession.

It's a particularly worrying trend, but particularly more so for women. They have probably not got the pension provision because they've taken time out to have children and then perhaps chosen to work part-time for a number of years. The decision of when to retire for them will be much harder.

They are also the ones that having to choose between putting money aside for their own retirement and helping children or grandchildren they are more likely to choose the latter.

What's the Solution - When to Retire?

In order to have enough money when we retire we have to accept that the world has changed and perhaps we and our adult children have to lower our expectations.

There are other ways of studying for a degree. I did it much later in life through my employer who funded the tuition fees. Yes it was hard working and studying at the same time but many people do it.

It's possible that employers will be forced to change their expectations if the pool of graduates looking for jobs shrinks as more and more younger people shy away from being burdened with debt.

Perhaps we have to accept that in future home ownership will only be for the well off and our children will have to be content with renting.

Our children will have to be aware that financial responsibility does not cease with their children at the age of 18 and put more money aside each month rather than have to borrow as some are having to do now.

A Different Generation!

Each generation has different challenges, our parents had the war to contend with, we baby boomers aspired to a job for life and to home ownership, but it wasn't easy.

We didn't have access to credit cards and loans we had to save for the things that we wanted. When we got married we started with the basics and saved hard for the luxury items.

Our children are likely to have numerous jobs throughout their working life and the need to be more flexible may make it more attractive to rent rather than buy. They might have to be more realistic about the big weddings, flash cars and homes stuffed full of gadgets they seem to expect from day one of their life together.

And what about us, the baby boomer generation? We will have to learn when to take a step back and put the closed sign up at the bank of Mum and Dad or we may find we become a burden to our children when we finally choose when to retire.

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