Financial Freedom for Empty Nesters: Smart Moves for Your Next Chapter

The day has arrived. The kids have flown the nest! Beyond enjoying the simple pleasure of grilled cheese every night (without the pressure of a balanced meal!), this new chapter brings significant changes, especially to your finances. Just like your dinner table, your financial life undergoes a transformation. Let’s explore some smart money moves to make the most of this exciting phase of becoming an empty nester.

The Natural Reduction of Expenses

One of the most immediate benefits of an empty nest is the natural decrease in many household expenses. Think of it as a financial exhale! Here’s where you’ll likely see a difference:

• Tuition: The monumental expense of private school or college tuition is finally behind you. No more hefty checks for tuition or those surprisingly costly textbooks.
• Extracurricular Activities: Say goodbye to the constant drain of travel sports, dance lessons, specialized equipment, and private coaching. These savings can really add up!
• Daily Living Costs: With fewer mouths to feed and fewer needs to meet, your monthly spending on groceries, gas, clothing, and entertainment should ideally decrease.
• Healthcare Costs: While children can remain on your health insurance plan until age 26, encourage them to transition to their own employer’s plan as soon as possible. This not only reduces your premiums but also empowers them to navigate the world of deductibles, co-pays, and out-of-pocket maximums – essential “adulting” skills!

Boosting Your Savings Potential

With reduced expenses, you now have the opportunity to significantly bolster your savings. Consider these key areas:

• Emergency Fund: This is the perfect time to reassess your emergency fund. Ideally, it should cover six months of essential living expenses. If it was depleted during the high-expense years of raising children, prioritize replenishing it to provide a financial safety net.
• Retirement Savings: Maximize this opportunity to accelerate your retirement savings. If you aren’t already, aim to max out your employer-sponsored retirement plan. Consider diversifying your investments further by contributing to a brokerage account, offering additional tax benefits and investment options.

Supporting Adult Children

Navigating financial support for adult children requires careful consideration and open communication.

• Expenses: Deciding whether to financially support your adult children is a personal choice. Encourage financial independence as early as possible to empower them to thrive on their own. Consider your own financial security, if you were to lose your job would you still be able to support them?
• Setting Boundaries: If you choose to provide support, establish clear guidelines and expectations. Outline specific goals and timeframes to help them progress toward financial independence. This approach fosters responsibility and prevents potential resentment.

Healthcare Costs in Retirement

While your children’s healthcare costs may decrease, your own healthcare expenses will likely increase in retirement. Factor this into your long-term financial plan. Research potential healthcare costs, including Medicare options and supplemental insurance, to avoid any surprises down the road. Enlist the aid of a healthcare broker to help you navigate the cost of the private insurance market if you retire prior to Medicare eligibility (age 65) and also to help select a Medicare supplement plan.

Embrace Your Next Chapter with Financial Confidence

The empty nest phase is a significant milestone, offering both new freedoms and financial opportunities. By carefully managing expenses, prioritizing savings, and thoughtfully addressing the support of adult children, you can confidently navigate this exciting new chapter and build a secure financial future.

This is the perfect opportunity to meet with your Wiser Wealth advisor to check in on your financial plan or start from scratch if you’ve put it off until now. It’s never too late!

Have questions? Feel free to contact us.