Financial moves for empty nesters

You’ve worked hard for many years to help your children grow into well-rounded, capable adults. Now the time has come for them to 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 arising from this new chapter of your life.

How to financially 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 joy 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 can 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 tips for empty nesters

For the first 18+ years, parents are mostly dedicated to the needs of their family and allocating the necessary resources to running an entire household. Now, as an empty nester, it can be an excellent time to explore some important questions and prioritize finances in several ways you might not have considered before.

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

Recent estimates show that it costs almost $240,000 to raise a child to adulthood, and that’s before college. While many would agree that the financial investment is worth it when it comes to raising a family, other financial goals may be sidelined during a child’s younger years. Now that they’re adults, it can be a good time to look for new ways to revitalize a retirement plan and create more financial stability for the future. Perhaps that involves diversifying a portfolio or exploring different investments. If the goal is to grow retirement savings without downside market risk, then a fixed index annuity (FIA) can be a good option.1 This solution can also turn savings into a guaranteed income stream throughout retirement.

2. Should an empty nester update their estate plan?

Along with updating a retirement plan, this can be a good opportunity to review an estate plan and make any necessary updates. Parents may want to consider listing an adult child as a financial executor or a medical power of attorney, especially as they are getting older. If a will was set up that would put money in a trust when children were young, this may need to be updated now that they’re grown. This can also be a good opportunity to review any life insurance coverage and who is listed as beneficiaries. Reviewing and updating an estate plan now can offer some peace of mind, knowing final wishes are outlined and can be easily followed.

3. Should an empty nester consider downsizing?

As the day approaches for the last child to leave the nest, many couples consider 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 and 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.

Discussing personal goals with a financial professional can help you find the right solution for you.

What should empty nesters include in their financial plan?

To help couples reach their goals for the future, several important steps can get their financial ducks in a row:

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

North American can offer financial guidance to empty nesters

Devoting years to raising children and sending them out into the world is a fantastic accomplishment—now it’s time to turn the focus back on you! Becoming an empty nester can spur new and exciting personal and financial opportunities. As with all aspects of financial planning, the sooner you can start creating a retirement strategy, the higher the success rate of reaching your goals as you head into the next chapter.

1. 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, resulting 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 who are insurance licensed will be paid a commission on the sale of an insurance product.

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