Some baby boomers appear to still be expecting to fund their retirement via inheritances from their parents, according to financial planner and 2012 winner of the Association of Financial Advisers (AFA) Female Excellence in Advice Award, Christine Hornery, CFP, director of FMS Group.
“A lot of conversations I am having with baby boomers are based around their belief that an inheritance is on its way,” Ms Hornery says. “However, I believe the cost of aged care, even after the introduction of the Living Longer, Living Better reforms this month, may eat its way into those inheritances, potentially putting baby boomers into a worse financial position in retirement than their parents.”
Ms Hornery says she thinks some people are really underestimating the growing cost of aged care and the toll it may take on expected inheritances.
“The minimum daily fee for aged care from 1 July 2014 is $46.50 per day. Along with other costs that may be incurred, for example accommodation payment or contribution, means tested fee, additional services fee, etc. chances are expected inheritances are going to be less than baby boomers expect or, given we are all living longer, may be so long coming they do not arrive when they are needed most.”
Ms Hornery says baby boomers need to push the thought of inheritances to one side when considering their retirement plans and start thinking strategically about how to fund their own retirement, not just through superannuation, but via other strategies that help them plan for the unexpected.
Baby boomers also need to be educated so their retirement funding will last them through their whole retirement, according to Ms Hornery.
“I have met people who have accessed their superannuation as soon as they retire, spent the whole amount in two or three years – whether it be on things they expected or not – and had to apply for the aged pension,” she says. “That is obviously not a grand retirement plan, for them or for the country, but it is the reality.”