Navigating the Pitfalls: Superannuation as an Intergenerational Planning Tool

Leaving inheritance wishes to chance is an example of an undefined goal; a sentiment without a defined “what” and “how”. Achieving financial goals and securing a legacy that withstands the test of time needs a plan.  

I aim to shed light on the potential risks associated with exclusively relying on superannuation as the linchpin of intergenerational planning, and to emphasise the importance of a comprehensive and adaptable financial strategy. Today presents an opportunity to act and plan a better way to fund a legacy.    

The SMART Approach to Goal Formalisation: 

Financial planners, myself included, employ the SMART (Specific, Measurable, Achievable, Relevant, and Time-bound) goals approach to crystallise the aspirations of our clients. While superannuation is an invaluable tool, fixating solely on it might compromise the specificity and relevance of your goals, thereby hindering the effectiveness of your intergenerational intentions. 

Your motivations: 

Understanding what motivates your desire to leave behind a legacy is integral to effective financial planning. While superannuation is a cornerstone for retirement, placing it at the forefront of intergenerational planning might inadvertently overshadow other vital goals such as education funding, home ownership assistance, or philanthropic endeavours. Your legacy wishes are also an example of your values. Prioritising SMART goals aligned with you (and your spouse’s) motivations ensure a holistic and purposefully driven financial plan. 

Devising Strategies Beyond Superannuation: 

While superannuation forms a vital part of intergenerational planning, exclusive reliance on it exposes your legacy to potential pitfalls. To mitigate risks, diversification is required. Superannuation could be described as a trust for the benefit of the member and their dependant / interdependent spouse and non-adult children. Whilst superannuation beneficiaries may also include acceptable interdependencies such as adult children, crafting a strategy that combines superannuation with other investment vehicles can enhance resilience against market volatility, legislative changes, and unexpected life events for all involved. Timing achievement of the goal with the funding source is a very important consideration. 

Adapting to Circumstances: 

Change is inevitable. The significance of regularly reviewing and adapting financial strategies to accommodate change is an ongoing tactic successful goal chasers use. Superannuation, while an important pillar in the retirement funding mix, is subject to legislative amendments and market fluctuations. On it’s own, it can’t achieve your intentions without a strategy designed for the well-defined objectives you set it.  

Monitoring and Reviewing Progress: 

Monitoring progress towards your SMART goals is a cornerstone of effective financial planning. Over-reliance on superannuation may hinder your ability to respond to unforeseen challenges or capitalise on new opportunities. Regular reviews allow for course corrections, ensuring your intergenerational plan remains resilient in the face of changing circumstances. 

Therefore, regularly measuring progress, considering your changing circumstances and making timely adjustments to your nested set of actions, will build resilience into your intergenerational plan. 

In conclusion, while superannuation plays a pivotal role in intergenerational planning, a holistic and diversified approach is key to mitigating risks. As your personal financial planner, I advocate for a strategy that combines the power of superannuation with other financial tools, all under the umbrella of SMART goals. By formalising aspirations, prioritising your motivations, devising adaptable strategies, and consistently monitoring progress, we can craft a financial legacy that stands strong, regardless of the uncertainties that may arise.  

Remember, the journey towards securing your financial legacy is dynamic, and with careful planning, we can navigate the complexities and build a lasting heritage for generations to come.  Contact our team on how you can secure your financial future.

Damien Quirk is a Senior Financial Adviser and has worked across the finance industry including superannuation, personal advice and the banking industry for more than 30 years. He has assisted high net worth individuals with complex financial structures right through to working with mum and dad’s and their important personal financial goals.