Leaving the right legacy – how to reduce the risk of leaving a financial mess

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15 January 2019

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Retirement. The prospect of those long days spent where you want, with little or no demands on your time. Mortgage and debt-free, with a bank of cash in super and savings, you choose what you want to do, when you want to do it... sounds perfect, doesn’t it?  

Retirement reality however, is often very different. Research shows that Australians are entering retirement in more debt than ever before – people aged between 65 and 80 owe an average of $158,000 on their mortgage1, while many are delaying retirement based on the debt they are carrying. 

If you do retire with a mortgage, this can often be repaid by leveraging the equity in the property to downsize, or using a payout from your super, however both options have knock-on effects on the finance available to fund your retirement, and the size of your estate.

And, even if you are mortgage-free by the time you come to lay down your tools, there are likely to be some unplanned financial pressures ahead – all of which can impact your spending power and can result in the accumulation of debt in retirement.

The kids. And grandkids.

The dream is that, by the time you choose to bid a fond farewell to full-time employment, you’ll have a life and financial freedom like never before.

If you have kids, you’ll probably need to think again.

From first-time housing affordability to weddings and education, today’s young adults have high demands on their cash.

And, consequently, so too do their ageing parents.

A study in the US found that over 65% of people aged 50-plus had provided financial support to their children in the past five years, 60% would delay their retirement if their kids needed money, and 40% would return to work after retirement if their family needed it2.

It may be help with home deposits, weddings or cars, or school fees or swimming lessons for the grandchildren… whatever the reason, in retirement you’re likely to face some demands on your finances from your offspring.

Till retirement us do part?

‘Grey divorce’ is a phenomenon that’s on the increase. The average age of divorcees in 2016 in Australia was 45.5 for men and 42.9 for women3 - a figure that’s increasing year-on-year. In the USA, divorce rates in those aged 50-plus have more than doubled since 19904.

Reasons are rarely straightforward, however the stigma attached to divorce is no longer as great as it once was and, after children leave home and work has stopped, people naturally question how they’re going to spend the rest of their lives.

While divorce itself is unpleasant to deal with, there’s a significant knock-on effect to the financial situation of retirees, as a retirement budget may have been put together for a couple.

The budget assigned to a joint retirement may not be enough to fund two separate retirements, and as a consequence grey divorcees are finding themselves in positions of significant financial stress5,6.

Do you want to live forever?

If you retire at 65, you hope to have a minimum of 15-20 years to enjoy your retirement – the latest research7 shows that Australian women have an average life expectancy of 85.5 years and men 81.5 years.

And while planning for how long we’ll live is critical for retirement, you cannot base your financial plans solely on this. After all, it’s just an average…

Projections of our longevity suggest we’re going to be living longer in our later years. Of the people in our society aged over 65 in 2017, 30% were aged 75-84, and 13% were 85 and over8. In 2045, however, it’s predicted that 35% will be 75-84 and 20% will be aged over 859

The longer we live, the more money we’re going to need. And the more medical costs we’re likely to incur too – people aged 65 and over have at least one chronic disease10 that they need to tend to.

So, what can you do?

With all of these additional pressures on your finances, it’s essential to keep comprehensive details on everything you have – and everything you owe.

Make sure all of your paperwork, including your will, is up-to-date and in a safe place.

Review your life insurance policy too, as this could cover any credit card debt or car loans you may have taken out, or any mortgage or funeral expenses you may incur.

Make sure the nominated beneficiaries on any insurance policies are current – after all, your personal circumstances may well have changed since you took out your policy.

Taking the time to sort your affairs and update your will and insurance policies is important. Once all of your paperwork is organised and in order, your family will understand exactly what you wanted and where it’s meant to end up.


  1. https://www.domain.com.au/news/australians-are-entering-twilight-years-with-150000-of-mortgage-debt-ing-direct-20160607-gpdhip/
  2. http://agewave.com/wp-content/uploads/2016/07/2013-ML-AW-Family-and-Retirement_The-Elephant-in-the-Room.pdf
  3. http://www.abs.gov.au/ausstats/abs@.nsf/mf/3310.0
  4. http://www.pewresearch.org/fact-tank/2017/03/09/led-by-baby-boomers-divorce-rates-climb-for-americas-50-population/
  5. http://journals.sagepub.com/doi/abs/10.1177/0164027516656139?journalCode=roaa
  6. https://www.smh.com.au/money/planning-and-budgeting/grey-divorce-has-huge-impact-in-the-retirement-years-20150527-ghah6i.html
  7. https://www.aihw.gov.au/reports-statistics/health-conditions-disability-deaths/chronic-disease/overview 

These pages contain general information only and do not take into account your personal circumstances, objectives or needs. This information is provided in good faith and believed to be accurate at the time it was placed on the MLC Life Insurance website, however we make no representation or warranty as to the reliability, accuracy or completeness of this information.

The information provided is not intended to constitute financial, legal or medical advice, or to substitute for the need to consult with your advisers or treating practitioners. Before acting on any information in these pages, you should consider whether it is right for you and consult with your financial, legal and/or medical advisers.

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