Retirees lean on children for financial support on top of superannuation – Editorial

The retirement dream is getting harder for older New Zealanders, who are now looking to their kids for help. Photo / Getty Images

Editorial

• The “bank of children” is emerging as older New Zealanders rely on their grown children for financial help.
• Rising living costs and inadequate superannuation make retirement challenging, with many needing $300,000 to $1.3 million in savings.
• This shift places an emotional burden on parents and children, especially in Māori and Pasifika homes.

The Bank of Mum and Dad has for years been a lifeline for young Kiwis trying to get ahead.

Parents used their equity from decades of rising property values to help their children afford home deposits, bridging loans, or clear debt owed to the banks.

But a new financial institution has emerged and is becoming more obvious: the bank of children.

As retirement becomes increasingly uncertain, older New Zealanders are leaning on their grown children for help.

The road to retirement is becoming overburdened by speed bumps – rising living costs, a sluggish superannuation, and inflation’s erosion of the purchase power of savings.

Not to mention Kiwis are living longer so their nest egg needs to go further.

While superannuation provides about $28,000 a year for single people and $43,000 for couples, this often falls short of covering modest living expenses.

Consumer website MoneyHub says to retire comfortably, most Kiwis need between $300,000 and $1.3 million in savings, depending on their desired lifestyle.

A modest retirement needs an annual household income of $50,000 to $70,000.

Research by the Retirement Commission showed more than a third of retirees relied solely on New Zealand Superannuation.

MoneyHub founder Christopher Walsh said the brutal truth about retirement in New Zealand was that most people needed a lot more money than they thought.

“I’ve spoken to retirees who thought they were set for life with a $600,000-plus property portfolio, only to find themselves borrowing money from their children within five years of retiring.”

Not only are younger Kiwis helping to cover the costs of their parents’ food, rent or medical bills, but parents are also moving in as a way to reduce costs.

Families are buying transportable houses as alternatives to retirement villages, a house manufacturer’s chief says.

Bryce Glover, HouseMe’s Takanini-headquartered sales and marketing general manager, said families who owned a property with some extra ground were buying tiny houses priced from $49,000 for their ageing parents.

This shift to the bank of children carries an emotional burden – shame especially. That could be why retirees faced with hardship instead choose to cut back on food, power, or social activities.

The emotional levy lies with the children too. Many feel a deep sense of responsibility to support their parents, such as in Māori and Pasifika homes where intergenerational care is hugely important.

We need to start asking ourselves whether we are ready for a future where retirement is no longer self-funded? Young Kiwis know a future plan most likely involves the help of mum and dad but do they know it could involve helping mum and dad?

Also, what happens to those people without children or whose children are themselves financially stretched?

While New Zealand’s current superannuation has perks – such KiwiSaver’s expected boost, and it being universal rather than means tested – policymakers need to honestly assess whether it is truly sustainable as life expectancy increases and living costs rise.

The bank of children may not have a branch, but it appears it is open for business.

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