The period after your last child leaves the nest is often described as “bittersweet”–which generally means you’re singing Sunrise, Sunset while turning their game room into a home gym. But in addition to causing conflicted feelings, becoming an empty nester can also make it difficult to figure out what comes next.
This is a great time to recommit to your investment goals and financial plans. Not only will that put you in a better position for your eventual retirement, but it can also give you something to focus on other than how infrequently your kids text you.
Here are the money moves you should take when your nest is newly empty.
Decide how much support you’ll give your kids
It’s rare for an adult child to launch and stay launched. Recent college graduates often come back to the family home while trying to find a job, 20-somethings may ask for financial help when they’re struggling to pay bills, and don’t be surprised to regularly find your otherwise independent young adult using your laundry room at odd hours.
Helping your children through their first forays into adulthood is part of being a loving parent. But that doesn’t mean you should provide more support than you can afford. According to a recent Pew Research study, 44% of young adults received financial help from their parents in the past year. Unfortunately, 36% of the parents providing money to their adult children are hurting their own personal financial situation by helping their kids.
This is why it’s important to have open conversations with your spouse (or partner, or co-parent) about how much and what type of support you can provide to your kids as you approach the empty-nest phase. If helping Junior with his rent is going to hurt your retirement savings plan, it’s better to present a united front. Additionally, talking about this issue before it comes up also means you’ll be prepared with nonfinancial ways you can help—like having Junior come live at home or helping him to find a lower-cost apartment.
Move to a smaller empty nest
Whether you intend to stay in your family home or you’re counting down the days until you move into a condo where someone else does the snow shoveling, downsizing after the kids move out can help your finances.
To start, pulling a Marie Kondo on a lifetime’s accumulation of stuff can potentially net you some cash. Depending on what you’ve been holding onto (remember that Millennium Falcon Lego set that you never got around to building?), there may be a small mint hiding in your own and your kids’ closets. Even if downsizing your possessions doesn’t result in ready cash, having less stuff means you know what you have and where to find it, and you can spend less time and money organizing.
But you can also downsize other aspects of your life. Do you still need the cellphone service or streaming subscription or additional car you’ve been paying for while your kids were at home? Just after your kids move out is an excellent time to look through the regular bills you pay to see if anything can be cut back or eliminated now that you’re empty nesters.
And if you do want to move to a smaller home, that can have a huge impact on your finances, since housing is the average American household’s single largest expense. Trading in your larger mortgage and property tax bill for a more modest home with a smaller price tag can be one of the most effective ways to increase your monthly cash flow.
Increase your retirement savings
Generally, the surprise orthodontia bills, field trip expenses, and need for new clothes after an overnight growth spurt are now behind you once your nest is empty. It may be tempting to use the freed-up cash for dinners out, vacations, or other fun stuff you put on hold while the kids were home, but make sure you set aside a sizable portion for your future.
A good goal to aim for is maximizing the contributions to your 401(k), IRA, or other tax-deferred retirement account. Currently, the maximum annual contribution for a 401(k) plan is $23,000 for anyone under 50, and $30,000 for anyone 50+. IRAs have an under-50 contribution limit of $7,000, and a limit of $8,000 for anyone older than 50.
What if you can’t swing tens of thousands of dollars in contributions each year? That’s quite all right. Most people can’t afford to fully maximize their tax-deferred retirement contributions. But doing whatever you can to increase your total contributions will be something your future self will be glad for.
Enjoying the empty nest
Feeling a bit adrift after your kids fly the coop is only natural. But don’t let the transition affect your finances. Instead, have open conversations with your coparent about how much support you can afford to give your adult kids, find money in your budget through downsizing, and increase your retirement savings.
And if you really wish your kids would give you a call, change the Netflix password.
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