Moves You Should Make When Your Children Leave Home
The term “empty nest” can bring with it many mixed emotions for parents. Whether a child is heading off to college or they are moving out of the family home and into their first apartment, this is a transition stage that requires some adjustment for everyone. While a son or daughter might be getting their first taste of independence and the responsibilities that go along with that, the parent who has spent many years prioritizing their child’s needs will also be entering into a period of change. It can be challenging and emotional to watch your child begin their adult life, but it is also an important time to take some financial steps that will help you to refocus your resources and keep you on track to achieve your own goals.
Reevaluate Your Budget
When your kids move out of the house, this will likely have a positive impact on your finances and give you an opportunity to think about the ways you would benefit the most from redirecting money toward other goals. If your child has gone to college, although some of your bills like groceries and utilities can be lower, you might still be covering some of their needs such as school expenses, insurance, or car maintenance costs. If your child is done with school and moving out with complete financial independence, the change in your household budget might be greater. You can begin by reviewing your income versus your expenses to determine exactly how your monthly finances may have changed and then make a plan for how you can best use any funds that are now available.
Maximize Retirement Contributions
You may not even realize how much you have been spending on supporting your children while they were living at home. It’s easy to get caught up in day-to-day life and before you know it, you might be closer to retirement but have not been able to save as much as you would have liked. Now that you may have extra funds freed up in your budget, it is an excellent time to become more proactive. Your financial advisor can review your current financial plan and help you to make an adjustment in how you are saving for retirement. This may include increasing your contributions to 401(k)s, IRAs, or other retirement accounts and taking advantage of catch-up contributions if you are age 50 or older and a super catch up if 60-63. They may also review your investment strategy and make adjustments that may better align with your changing risk tolerance.
Reassess Your Insurance Needs
Are your children on your health insurance plan? Now is the time to make adjustments if they will be getting their own coverage. The same applies to your auto insurance. If your child is a licensed driver and lives with you, they are typically covered as a rated driver on your policy, which affects your insurance cost. (However, if they have their own auto policy in their name, this does not apply.) You can keep your adult child on your policy as long as they are a full-time student, or their permanent address is your home. But once they move out, it is time for them to obtain their own coverage.
You should also review your life insurance policies. You may have purchased coverage that would provide financial security for your family when your children were young, but your needs may be different now. It can also be a good idea to consider long-term care insurance as you think about your future healthcare coverage needs.
Downsizing or Relocating
You may have raised your children in a 4-bedroom home that is bigger than what you need now that they have moved out. It might make sense to downsize to a smaller home with reduced maintenance costs. Or perhaps you have always dreamed of a retirement in a warm and sunny location, or your children have relocated out of state, and you want to be closer to them. Your financial advisor can help you review your options and create a plan that will also take into consideration the net proceeds from the sale of your home. This may help you to make a move that aligns with your retirement and lifestyle goals.
Update Estate Planning Documents
When your children move out of the house, it can be a good time to review your estate planning documents and make any necessary updates to ensure that they still reflect your wishes. For example, if you created your documents when your kids were little, you may have named guardians they no longer need. This can also be an opportunity to open up a conversation with your kids about your estate plan. Now that they are adults, they may be mature enough to take on roles such as a contingent power of attorney or health care proxy.
Plan for Fun
What makes you happy and gives you a sense of enjoyment in your life? Do you want to travel? Do you want to spend time volunteering with a local charity? Do you want to get a puppy? Or take dance lessons? You have spent years providing for your children and planning for the future, often leaving little time to pursue your own interests. While you should continue to prioritize your financial security, now is also a time to set aside a portion of your budget for experiences that bring you joy. Whether you dream of going on a cruise each year or you want to learn a new hobby, as an empty nester with fewer responsibilities and more financial flexibility, this is the perfect opportunity to focus a little more on yourself.
Becoming an empty nester is a big adjustment. Although this change can be hard for many parents, it can also be a time of new opportunities. By consulting with a financial advisor and taking some strategic financial steps, you can achieve your goals and open the door to new and fulfilling experiences. If you would like to learn more about how we can help you, please contact us.
