An Essential Financial Checklist for Empty Nesters
The empty nest stage doesn't just mean that your kids have a chance to test their wings. It also offers you an opportunity to reimagine the next stage in your own life. With that in mind, browse these empty nest financial tips to see which ones make sense and give you a new outlook for your future.
Seven Steps for Empty Nesters
1. Consider your space: If your kids have left home, maybe it's time to consider downsizing your home. Lower bills and less maintenance can help free up savings and energy for retirement. If you're not ready to leave, take the opportunity to declutter and repurpose unused game rooms or bedrooms instead.
2. Revisit life insurance policies: Like many families, you may have purchased a term policy to provide for children and pay off a home several years ago. At this point, you might think about the value of redirecting your funds to permanent life or even long-term care insurance.
3. Evaluate health plans: If you're near retirement age, it's always a good idea to explore various ways to enhance Medicare benefits with supplements, Medicare Advantage, prescription benefits, or other retirement health plans. If you're younger, you should figure out if you need to keep kids on your family policy or even how long the insurer will allow it. Learn more about health coverage with Medicare
4. Explore how your taxes may be affected: Don't let any potential tax impacts of your children's new independence take you by surprise. If your kids support themselves, you can't claim them as dependents. To make up for this loss, you could consider increasing your contributions to a tax-advantaged retirement plan.
5. Check your retirement savings plan contributions: Ideally, having your kids leave home will free up some extra cash that you used to budget for their expenses. While it's fine to pamper yourself a little more, most empty nesters can benefit by diverting some of these discretionary funds towards retirement savings.
6. Start or revisit estate planning: Sometimes, parents create wills and assign beneficiaries early in their marriage. After decades have passed, it's possible things have changed. For example, you may have had more children or accumulated more complex assets. Besides updating estate plans, you should also make sure that you appoint an estate administrator who knows where to find everything.
7. Make sure you're spending money on things that offer you value: Over the years, you may have accumulated things that benefited the kids more than you. Some obvious examples might include TV cable or streaming subscriptions, extra vehicles, family phone plans, and gym or pool memberships. To help cut expenses and hopefully encourage savings, reduce these kinds of services or assets to only those that you will use and enjoy often.
Take Time to Adjust to Your New Normal Lifestyle
It takes time for most empty nesters to adjust to their new child-free environment. Hopefully, this stage will free up more time and money to ensure that the next stage of life continues to provide plenty of joyful reunions and a comfortable lifestyle.
This blog is up to date as of June 2021 and has not been updated for changes in the law, administration or current events.