4 financial moves for empty nesters
Finance 101
Key Takeaways:
- If you’re still supporting your grown children financially, start a dialogue and map out a plan for how they can become financially independent.
- Does your home suddenly feel empty? Downsizing can be an exciting change and a great way to cushion your retirement funds.
- With the kids out of the house and a shift in spending, it’s time to focus on your retirement savings.
- When mapping out your financial future, don’t forget to revisit your estate planning.
You did it. From pee-wee sports to prom and beyond, your children have officially made it to adulthood. Now you can kick back and enjoy your empty nest. As you transition to this next phase, it’s a good idea to reevaluate your finances and consider some money moves that will allow you to shore up your retirement. Here are four ideas to get you started.
1. Talk to your kids about financial support
Parents always feel a sense of responsibility for their children, even after they’re grown. And many are still quick to provide financial support. One survey found that almost 40% of empty nesters help subsidize their children’s lives—paying for everything from groceries and cell phones to rent and student loans.1
While this instinct is understandable, it’s critical that children learn to manage their own finances and live within their means. Priya Malani, a millennial money expert and Founder and CEO of Stash Wealth, addressed this topic from the dependent’s perspective on episode 2 of our Friends Who Talk About Money podcast. “I think ultimately it’s when the dependency goes from harmless to harmful… when you're relying on your parents in a situation that is putting their financial security in jeopardy.”
One of the best ways to get your kids to a place of financial independence is to map it out together. Once they feel financially secure, you can redirect any money once used to support them towards your retirement, which will come in handy as you shift to living on a fixed income.2
2. Reconsider real estate needs
If you’ve lived in the same home for decades, moving may be hard to imagine, but an empty nest presents a great opportunity for downsizing. With the kids out of the house, you likely don’t need the same amount of space. Moving to a smaller home should allow you to cut down your upkeep and expenses, and can be an exciting change, too. Cutting down on your payments for utilities, rent, mortgage or property taxes would also mean you can boost your retirement savings or pay down any debt.3 If downsizing isn’t in the cards, and it makes sense for your situation, prioritizing paying off your mortgage before retirement could help your savings stretch further.
3. Revisit retirement planning
Now that the kids have flown the nest, it’s time to revisit your retirement plan. Your everyday expenses are presumably lower now. There are a lot of small things that add up; for example, you might not be spending as much on groceries, or on your children’s extracurricular activities. You might also no longer be putting money away for their education – or perhaps can see the finish line on the horizon. Any of these changes can leave you in a position to really focus on your retirement savings. If you’re over 50, for example, you could repurpose some of these funds to make catch-up contributions to your 401(k) and boost your nest egg.4
4. Assess your estate plan
If you haven’t already done so, now is also a good time to solidify estate planning. It’s important to put protections in place to safeguard your financial legacy and to take steps that will provide security for loved ones. You also might consider whether you want to make charitable contributions to causes you care about. If you have substantial assets, you may want to consult with a financial advisor, who will take the time to evaluate your goals and create a plan tailored to you and your family's needs.5
An empty nest presents a new chapter in your life. It’s the perfect opportunity to adjust your financial priorities and make changes that will leave you with a retirement life you look forward to.
Citations:
1 Business Insider: “Parents Are Paying for Their Millennial Kids Well After They Move Out of the Basement” by Tanza Loudenback, September 20, 2019 https://www.businessinsider.com/personal-finance/empty-nesters-continue-financially-supporting-grown-kids-2019-9
2 US News & World Report: “6 Money-Smart Steps for Newbie Empty Nesters” by Trent Hamm, August 22, 2017 https://money.usnews.com/money/personal-finance/family-finance/articles/2017-08-22/6-money-smart-steps-for-newbie-empty-nesters
3 Wisebread: “7 Smart Money Moves for Empty Nesters” by Mikey Rox, January 27, 2017 https://www.wisebread.com/7-smart-money-moves-for-empty-nesters
4 US News & World Report: “6 Money-Smart Steps for Newbie Empty Nesters” by Trent Hamm, August 22, 2017 https://money.usnews.com/money/personal-finance/family-finance/articles/2017-08-22/6-money-smart-steps-for-newbie-empty-nesters
5 US News & World Report: “6 Money-Smart Steps for Newbie Empty Nesters” by Trent Hamm, August 22, 2017 https://money.usnews.com/money/personal-finance/family-finance/articles/2017-08-22/6-money-smart-steps-for-newbie-empty-nesters
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