Learn and Plan | Changing financial focus for new empty nesters
A mother hugs her daughter before she leaves for college.

Changing financial focus for new empty nesters

Aug 15, 2022, 8:39:28 PM | Reading Time: 4 minutes

If you’re like many parents, it’s hard to imagine the day when your children leave the family home to head out into the world and begin their own lives. Will you be excited for this new chapter or have a hard time adjusting? While this transition can be bittersweet, many personal and financial opportunities can arise from an empty nest.

How to prepare for an empty nest: financial advice from empty nesters

When the day comes that it’s just you and your spouse, you may find yourself fluctuating between excitement and heartache as your new routine sets in. Fortunately, becoming empty nesters likely permits you to not only pursue your passions but may allow you to capitalize on financial opportunities that weren’t always possible with dependents in the home. As your budget begins to open up and spending slows down, your focus commonly shifts back to you as a couple. This is a perfect time to revisit your retirement plan, make any adjustments, and hopefully 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

You’ve likely had children in the home for at least 18 years or longer, and during that time, you were focused on the needs of your family. 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. Should an empty nester consider downsizing?

Many couples sell their home to downsize to a smaller house or condo once their children leave the nest. This can often lower your bills, lead to less upkeep, 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? How is the real estate market? Will your kids come home often to visit? 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.

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

The average cost of raising a child to adulthood in 2015 was over $233,000.1 With growing inflation, this number has likely grown over the years. 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 may be a good option.2 This solution could also turn your nest egg into a guaranteed stream of income throughout retirement.

3. Should an empty nester update their estate plan?

Similar to your retirement plan, this can be an ideal time to revisit your estate plan and make any necessary updates. With you and your spouse getting older, you may want to list your adult child as a financial executor or your medical power of attorney. 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 can allow you to focus on today knowing your wishes for tomorrow can be covered.

What needs to be included in a financial plan for empty nesters?

To make the most of this next stage of your life, there are several important steps that can help polish up your financial plan:

  • Review and revise your budget and household expenses
  • Pay down debt, such as credit cards, student loans, or car loans
  • 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

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

Just because your children leave home, doesn’t always mean they stop relying on you financially. Perhaps you’re still paying for college or student loans, or helping with other living expenses. This is a good time to establish a timeline for transitioning away from paying for your children’s needs and helping them become financially independent. By teaching 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 may be the time for you to start maximizing your savings for the future, consider setting 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.

Conclusion

As you become an empty nester, changing your financial focus can welcome new and exciting opportunities. Just like with any facet of financial planning, the sooner you begin to think about the future and identify your key goals, the smoother it will be when the day arrives. Be sure to take time to celebrate the wonderful accomplishment of raising your children and sending them out into the world, you did it! Then, turn the spotlight back to you and find the financial path that allows your dreams for the future to 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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