When your children grow up and ‘leave the nest,’ it marks a significant milestone in your life – and it can be very emotional, too. After years of nurturing your children, this period presents an excellent opportunity to consider investing your time and energy in your own financial matters. As an empty nester, now is the perfect time to reassess and reevaluate your financial strategy to strengthen the financial future of your family. Below, we outline four key financial considerations for empty nesters. Read on to discover which strategies might be right for you.

Help Your Kids Learn to Determine Their Own Financial Path

No matter how long our children have been independent, they will always remain our children! It’s natural to feel a sense of responsibility for their well-being, including their financial stability. However, it’s important to recognize the tendency to continually offer financial assistance, which can sometimes be difficult to resist. A recent survey found that about 45% of parents with adult children provide financial support to at least one grown child. This includes helping to pay for things like groceries, cell phones, rent or mortgage payments, and student loans. More than 50% of these grown children are upwards of 24 years old.

While it’s completely natural to want to assist your children, you might inadvertently hinder their financial independence if you don’t encourage them to manage their own finances. This is especially critical if your generosity jeopardizes your own financial stability and future. That’s why this first of the financial considerations for empty nesters we’re sharing is actually more focused on your kids. Consider sharing your knowledge and experience with them. Take some time to help them build a budget, set goals, and map a course to help them achieve those goals. While it can be emotionally difficult to think about end-of-life plans, an estate plan can help you manage your assets and potentially contribute to your legacy..

Consider Your Current Real Estate

Moving is widely regarded as one of life’s most stressful experiences, leading many to avoid it whenever possible! Despite this, empty nesters often find that this stage of life is an opportune time to reassess and potentially change their living arrangements. Do you still need a house big enough to raise a family in? Perhaps there’s a community that you’ve had your sights on for some time. While the prospect of downsizing may seem fraught with emotions, it can deliver valuable financial benefits. Selling a larger home for a smaller one may potentially lead to a profit, while it could also reduce your costs on expenses and maintenance. All of this can help boost your retirement savings.

Moving into a smaller home may not be part of your plan. In that case, prioritize paying off your mortgage before you retire. This can help you to preserve the equity that your real estate provides while maximizing your retirement savings, too - and it gives you the opportunity to utilize a reverse mortgage strategy in retirement if appropriate.

Reassess Your Retirement Plan

With the reduction in expenses that naturally occurs once children are grown, it’s crucial for empty nesters to reassess their retirement plans. Becoming financially independent can potentially allow you to focus more on your own financial plan for the future.

Some tips that can help you shore up your retirement savings with that extra money can include making catch-up contributions to your 401(k). You may also want to think about spreading your savings strategy across different kinds of accounts that have different tax treatments to take full advantage of available opportunities. For example, a Roth IRA is funded with after-tax money and offers tax-free growth and tax-free withdrawals in retirement. There’s also a catch-up contribution for IRAs available to people over 50, giving you the option to add additional savings.

Establish an Estate Plan

When your children are living on their own and you are now in midlife or beyond, it’s smart to establish an estate plan. It’s a critical move for adults of any age, and if you’ve overlooked this up until now, it’s not too late!

Start by taking stock of your goals and wishes for both you and your loved ones. While it can be emotionally difficult to think about end-of-life plans, an estate plan can help you manage your assets and potentially contribute to your legacy.

As part of your financial considerations for empty nesters, start by listing your assets and debts to clarify your financial goals. Gather key documents such as marriage certificates, divorce papers, insurance policies, deeds, titles, and bank accounts. Choose a medical and financial power of attorney, an executor for your will, and any necessary trustees. Hire a financial professional to review and certify your plans legally. While it may be uncomfortable, it's best to communicate your estate plans with your family now to reduce potential conflict in the future.

Are You Ready to Tackle This Phase of Life?

Becoming an empty nester brings many opportunities, but it can also be challenging. Give yourself time to adjust to this “new normal” and focus on ways to make the most of this new phase, including strengthening your financial standing. Making changes to your financial priorities now can potentially enhance your security and contribute to a more fulfilling future.

Need some financial planning guidance with navigating this phase of life? Reach out to our office to schedule a free initial strategy session!

Sources: 

[1] https://www.savings.com/insights/financial-support-for-adult-children-study  

[2] https://www.investopedia.com/financial-edge/1112/benefits-of-paying-off-your-mortgage.aspx

[3] https://www.investopedia.com/terms/c/catchupcontribution.asp 

Image via Shubhashish.chowdhury, CC BY-SA 4.0, via Wikimedia Commons.

Disclaimer:

The information presented here is for educational purposes only and is not a solicitation for the purchase of any financial product. The statements and opinions expressed are those of the author and are subject to change at any time. All information is believed to be from reliable sources; however, presenting financial professional makes no representation as to its completeness or accuracy. This material has been prepared for informational and educational purposes only. It is not intended to provide, and should not be relied upon for, accounting, legal, tax or investment advice.