Financial moves to consider if you’re an empty nester

For many years, you’ve worked hard to help your children grow into well-rounded, capable adults. Now the time has come when they will leave the nest to head out into the world. How will you feel when the day arrives? Will there be feelings of excitement? Or does the idea seem far too overwhelming? Hopefully, you can learn to embrace your empty nest and the many financial opportunities that can arise from this new chapter of your life.

Financial advice from empty nesters: how to prepare for an empty nest

If the idea of an empty nest causes you mixed emotions, you are certainly not alone. Many parents encounter both anxiety and elation with their newfound freedom. Fortunately, becoming empty nesters allows you to not only pursue your personal passions but can lead to financial opportunities that weren’t always possible while raising children. As your spending slows down and you gain more wiggle room in your budget, you are able to shift the focus back to your needs as a couple. This is a perfect opportunity to revisit your retirement plan, make any adjustments and possibly allocate more funds toward your savings to ensure you have the financial freedom to achieve the goals you’ve set for the future.

Financial considerations for empty nesters

Over the past 18+ years, you were dedicated to the needs of your family and allocating the necessary resources to running a full household. Now as an empty nester, it’s time to ask yourself some key questions and prioritize your finances in several ways you might not have considered before.

1. How can an empty nester revitalize their retirement plan?

According to the U.S. Department of Agriculture, the average cost of raising a child to the age of 18 in 2015 was over $233,000¹, a number that’s likely to go up based on annual inflation. While many would agree every penny is worth it when it comes to raising a family, other financial goals may take a backseat during your children’s younger years. Now that they’re adults, you may look for new ways to revitalize your retirement plan and contribute more to your financial future. Perhaps that involves diversifying your portfolio or exploring higher risk/higher reward investments. If you’re looking to grow your retirement savings without downside market risk, then a fixed index annuity can be a good option.² This solution can also turn your nest egg into a guaranteed stream of income throughout retirement.

2. Should an empty nester update their estate plan?

Along with updating your retirement plan, this is a good opportunity to review your estate plan and make any necessary updates. You may want to consider listing your adult child as a financial executor or your medical power of attorney, especially as you and your spouse are getting older. If you created a will when your children were young that would put money in a trust, this may need to be updated now that they’re grown. You will also want to review any life insurance coverage and who you have listed as beneficiaries. Taking the time to review and update your estate plan now will allow you to focus on today knowing your wishes for tomorrow are covered.

3. Should an empty nester consider downsizing?

As the day approaches for the last child to leave the nest, many couples begin to think about downsizing to a smaller residence. A reduced floorplan can often lead to less upkeep, lower your bills and potentially give you some equity from the sale to pay off debt or put toward retirement. If moving is on your mind, there are important factors to consider before making this big decision. Do you currently own your home? Will your kids come home often to visit? How is the real estate market? If you enjoy your home and neighborhood, you may be content with staying put. When thinking about downsizing, decide if it’s a step forward or backward and if it will help you achieve the lifestyle you envision for the future.

How empty nesters can help secure their children’s financial futures

Even when children reach adulthood and head out into the world, the need for financial support from their parents doesn’t always end immediately. This is a good time to establish a timeline for helping them become financially independent and transitioning away from paying for your children’s needs, like college loans, living expenses, or health insurance. When you teach your children about budgeting and money management when they’re young, they are more likely to carry those positive habits into adulthood and rely less upon you for financial support when they’re grown. Since this is the time for you to start maximizing your savings for the future, set financial boundaries for your adult children about borrowing money or returning home. If you haven’t already, you may also want to consider life insurance to help provide for your children’s financial future, as well as your own. Life insurance policies that feature cash value growth potential can create a legacy you leave to your loved ones and also help supplement your retirement income.

Discuss your goals with a financial professional to find the solution that is right for you. 

What should empty nesters include in their financial plan?

To help you reach your goals for the future, there are several important steps to get your financial ducks in a row:

• Review and revise your budget and household expenses
• Pay down debt, such as student loans, car loans, or credit cards
• Maximize your retirement contributions
• Discuss tax implications of your lifestyle changes with your tax professional
• Re-evaluate your retirement plan and/or investment portfolio
• Set aside money for life events like weddings, home renovations, or a grandchild’s education
• Review your estate plan and life insurance policies

Conclusion

Becoming an empty nester can spur new and exciting opportunities, both personally and financially. You’ve achieved an amazing accomplishment—devoting many years to raising your children and sending them out into the world—now it’s time to focus on you! As with all aspects of financial planning, the sooner you begin to envision your ideal next chapter and create the strategy to get there, the more successful you’ll be in achieving those goals and making your dreams come true.

1 U.S. Department of Agriculture, The Cost of Raising a Child, 2020

2 Fixed index annuities are not a direct investment in the stock market. They are long term insurance products with guarantees backed by the issuing company. They provide the potential for interest to be credited based in part on the performance of specific indices, without the risk of loss of premium due to market downturns or fluctuation. Although fixed index annuities guarantee no loss of premium due to market downturns, deductions from your accumulation value for additional optional benefit riders or strategy fees associated with allocations to enhanced crediting methods could exceed interest credited to the accumulation value, which would result in loss of premium. They may not be appropriate for all clients. Interest credits to a fixed index annuity will not mirror the actual performance of the relevant index.

The term financial professional is not intended to imply engagement in an advisory business in which compensation is not related to sales. Financial professionals that are insurance licensed will be paid a commission on the sale of an insurance product.

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