After the Kids Leave: Financial Planning Guide for Empty Nesters
The journey of parenthood is filled with milestone moments, but few are as emotionally significant as watching your children leave home for the last time. While you've spent years preparing them for independence - through homework help, driving lessons, and countless life talks - you might feel less prepared for this transition yourself. The house suddenly feels quieter, and your role as a parent enters a new chapter.
This shift brings not only emotional adjustments but also unique financial opportunities and considerations. Whether you're approaching this transition or have recently joined the ranks of empty nesters, having a solid financial strategy can help you navigate this new phase with confidence. After all, this chapter isn't just about your children's next steps; it's about reimagining your own future.
Let's explore how you can turn this significant life change into an opportunity to strengthen your financial foundation, while maintaining the safety net your adult children may still need. From smart downsizing decisions to retirement planning adjustments, this article will walk through the key financial considerations that deserve your attention during this transition period.
Pros and Cons of Downsizing
You worked for years to pay the monthly mortgage on that five-bedroom house so that your full family could fit comfortably. However, now that your kids have homes of their own, are in college, and/or have started their careers, does it feel unnecessary to have all that space?
It can be sensible to seek a smaller living space once everyone has grown up and left. But there are still some factors to consider. First, are your children well-established, moved in, and comfortable in their new life? While freedom can feel good on Day One, things change. Many parents want to provide a home that their children can come back to at any time. This doesn’t mean you have to maintain that massive house. It might mean you’re prepared with the necessary space should you need to support an adult child if the need arises. Not all parents may feel the need for that, but it is something to consider.
Alternatively, you may want to take a closer look at your personal finances. There is no broad-brush answer to say “yes, you should downsize,” or “no, you should stay put,” because no two financial situations are identical.
Take a look at current rates for a new home loan. Would an apartment or condo rental be more affordable? Do you have a lot of equity? Is the house a major asset you plan to leave to your children? There are plenty of questions you will have to answer for yourself (or, more wisely, seek the guidance of a financial professional!)
Redirect Kid Expenses into Retirement
Now that your child has “flown the nest” (or if you are preparing for this change soon), your monthly budget will probably shift pretty soon, too. Of course, for a little while, you may have the costs of tuition, room, and/or board for your college student. You may assist a new professional with their first apartment. Your young adult might need your help paying for the wedding of their dreams. Just because they are ready to be “free” doesn’t mean they’re financially “independent”!
But, once they have found a reasonable level of financial stability, it could be a good time to redirect funds you used to spend on a child in the home for your own retirement. All of those expenses can now be used as savings.
Chances are, your home budget doesn’t change much immediately after they depart (things like mortgage, utilities, etc.), but funds you used to divert for your child’s needs can now be put into a retirement fund. No extra money needs to come out of your pocket, and instead, you are simply repurposing funds you already consider “spent.”
Update Insurance as Necessary
When you experience a major life change, such as adult kids leaving the house, it’s also a good time to make sure your insurance policies still make sense for your family. If your child has entered the workforce, gotten married, and/or moved on to have children of their own, they may want to have their own life insurance policy, meaning you might need to discuss changing any you had out on them.
Additionally, your child may be able to take on their own car insurance, health insurance, or other supplemental policies, depending on their new living circumstances. Each case will vary by person, but this is a smart time to schedule an insurance check-up to review your options.
Estate Planning for the Future
Time marches on, and it truly stops for no one. As you move into another life stage, it is also an ideal time to remember that you won’t be on this earth forever. Someday you won’t be here to be a financial safety net for your loved ones. While smart life insurance policies, a passed-down family home, or savings can provide some assistance once your family is without you, the best way to protect them is through well-mapped estate planning.
If your nest is now empty, who will care for the house if you are gone? If you have younger children still in the home, have you clearly made legally-binding plans for their care? Are your loved ones financially covered in your absence? Now is a good time to ensure that your estate plans are buttoned up!
Planning Ahead
Whatever comes next, heading into the future requires careful planning. While we can’t predict every one of life’s circumstances, we can plan for life stages like the empty nest.
Often, the best-laid plans are made with experienced, professional advice! If you’re ready to head into the next stage, I’m here to help guide you along its path. Click here to make an appointment with my team to discuss this exciting life stage - or any of the transitions you find yourself in. And learn more what you can expect during a financial advising appointment, here.
Reegan Rehm, and Rehm Insurance and Financial Services are independent of, and not affiliated with, The Lincoln Investment Companies. Insurance products are not offered through The Lincoln Investment Companies.