When planning our finances, we often underestimate some of the influences that can negatively impact our best laid plans, especially as we approach retirement.

The situation of our family members can greatly affect our own situation, and trying to manage this is referred to as intergenerational planning.

It is more and more common to see children staying at home longer or returning home, sometimes with their own family. Elderly parents often become our responsibility. This has some wonderful benefits socially, most retired couples cherish this time with their parents, children and/or grandchildren (most of time anyway), there are however financial consequences.

When an elderly parent moves in with you, there are a raft of potential financial planning issues for both the parties. The cost of living is likely to change for both parties, there is likely to be Centrelink consequences and it is possible that preparations for an age care facility might be required.

If the parent has sold or is selling their home, there are a number of issues that need to be addressed. It is common to see the elderly parent contribute to an extension, granny flat or alike; in itself this is strategy that has merit. This may reduce the assessable assets, improve living arrangements for both parties and, in general, makes some sense. There are provisions that need to accompany this strategy.  It is necessary to ensure that an elderly parent has some certainty that they will retain either the right to remain living with their child or have some recourse to recoup their contribution.

Although no one has any intention of leaving their parents out in the cold, there are a number of events that can have potentially disastrous results. Things like divorce, death and unforeseen financial issues can all result in the parent losing their living arrangements and the funds they contributed.

Becoming financially responsible for your children and grandchildren can alter retirement plans substantially. Having your children come home but be mostly financially independent is going to have a moderate effect on your finances   If, however, they become dependent on you, this is can be an issue.

The most likely way that your children (or grandchildren) can become reliant on you is due to death or serious illness. These are insurable events; making sure that your children and partners have adequate insurances can protect you from this financial burden. It is becoming more common for parents to actually take out insurance on their kids to prevent financial risk.

Intergenerational planning is complicated and wide ranging.  I’ve just touched on a few issues here, but the point I’m trying to make is that those around us can greatly affect our own plans and being aware of this and developing contingency plans gives us the best chance of the retirement we imagine.