8 Smart Money Moves That Empty Nesters Should Make

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I. Introduction – Empty Nesters

Empty nesters can be an emotional time for parents as their children leave home and become more independent. However, it also presents a major financial transition point. With more time and changes in expenses on the horizon, empty nesters have an opportunity to reevaluate their finances and make smart money decisions. Proper planning and strategic shifts in spending can help empty nesters achieve financial freedom and start the next phase of life on the right foot.

A. Definition of Empty Nesters

Empty nesters are parents who have launched their children into adulthood and independence. This usually occurs when children leave home for college or to start their own households. Empty nesters find themselves with more time and space as their primary role of active parenting decreases.

B. Transition to an Empty Nest

Becoming an empty nester involves a psychological shift as daily interactions with children decrease. It also marks a life stage transition between middle age and retirement. Financially, household costs like clothing, food, and utilities may decline. More significantly, child-related expenses for college tuition and activities end.

This financial transition allows empty nesters to reevaluate spending. With prudent planning, they can reallocate resources to goals like retirement, travel, and passions put off while raising a family.

C. Importance of Financial Planning

Financial planning helps empty nesters manage this transition wisely. Proactive steps create short-term savings and align longer-term goals. This helps empty nesters gain financial freedom and improve quality of life. Whether done independently or with a financial advisor, key aspects include budgeting, debt reduction, insurance adjustments, estate planning, and retirement planning.

II. Managing Household Expenses

With children gone, empty nesters have an opportunity to reduce household costs in areas no longer needed. Strategic spending cuts in housing, utilities, transportation and insurance free up resources for other goals.

A. Declutter the House

Over years of accumulating kid-related belongings, clutter can pile up in a house. Decluttering provides financial and mental benefits.

1. Benefits of Decluttering

Decluttering helps empty nesters clear out items no longer needed with kids gone. This creates space and makes cleaning easier. Selling or donating unused goods provides extra income. Reducing storage needs may allow downsizing to a smaller home. Emotionally, decluttering also provides a sense of freedom.

2. Tips for Effective Decluttering

Go room by room. Start in less sentimental spaces like the garage, attic or basement. Sort items into “keep,” “sell,” “donate,” and “trash” piles. Schedule pickups from charities to remove donations promptly. For keepsakes, limit the number of boxes. Be willing to part with unused items in good condition to maximize sales. Time decluttering over weeks or months to make the process manageable.

B. Cut the Cable Cord

Many households accumulated extra television subscriptions for kids’ channels. With empty nesters now just catering to their own preferences, cable bills are an area to cut back.

1. Cost Savings from Cutting Cable

Eliminating cable in favor of streaming can save $75 or more per month. Over several years, this adds up to thousands of dollars. Even paring back to basic cable generates some savings. Examine your viewing habits to see what content you can do without.

2. Alternative Entertainment Options

Luckily for empty nesters, the rise of streaming now makes cutting traditional cable easy. Services like Netflix, Hulu, Disney+, and Amazon Prime provide abundant on-demand viewing options at lower price points. Streaming boxes like Roku or Apple TV open access. An HD digital antenna receives local broadcast stations for free. Mostly watch news or sports? See if individual channel subscriptions could supplement a smaller cable package at less cost.

III. Transportation and Insurance

With busy family lifestyles, empty nesters may find themselves with more cars than current needs require. Eliminating an extra vehicle can save significantly on insurance, gas, repairs and registration costs over time. Adjusting insurance policies to reflect a smaller household brings additional savings.

A. Sell a Car

Whether a child took a car to college or a family vehicle now mostly sits idle, empty nesters present an ideal time to downsize to one or two cars. This both saves money and reduces maintenance hassle.

1. Assessing the Need for Multiple Cars

Consider your lifestyle and transportation needs. Do you and your spouse each have a vehicle for commuting? Are extra cars mostly just picking up dust in the driveway? Could consolidating trips and sharing one or two vehicles meet your transportation needs? Assess the frequency of use to decide if it’s worth keeping extra cars.

2. Selling Process and Considerations

Once you decide a car is expendable, selling it eliminates ongoing costs. Selling privately often brings more money than trading in. Determine the fair market value of your vehicle by utilizing resources such as Kelley Blue Book. Proceed to showcase your car for potential buyers on popular online platforms like Craigslist, Facebook Marketplace, or Autotrader. Remove personal information from the vehicle. Meet buyers in a safe, public place to transfer the title after sale.

B. Remove the Kids from Your Insurance

Having children on an auto insurance policy can more than double rates in some cases. Once they are independent adults, taking them off your policies reduces this expense.

1. Insurance Implications

When young adults first start driving, adding them to a family policy helps minimize high premiums from lack of experience. Rates usually start decreasing around age 25 as drivers establish safe records. Removing grown children over 25 from your policy means forfeiting multi-car and multi-policy discounts. But the savings from lower risk usually outweigh discounts. Shop updated quotes annually, as different insurers calculate premiums differently.

2. Updating Your Policy

Contact your insurer to remove adult children from your policy. Remove young adults as drivers from all vehicles on the policy. Also update life, health, and homeowners policies if children were included. Providing proof a child has their own insurance can help lower your premiums. If a young adult still relies on your car occasionally, adding them as an occasional driver rather than primary policyholder may limit premium hikes.

IV. Managing Communication Costs

From cell phone family plans to an array of phone landlines, larger families rack up big communication bills. With reduced need, empty nesters can realize major savings by consolidating plans.

A. Drop the Extra Cellphones

It’s common these days for each family member to have a cell phone on a shared family plan. As kids leave home, it’s time to drop those extra lines.

1. Evaluating the Need for Extra Phones

Do both you and your spouse have mobile phones? Are you still paying for your adult children’s lines? Are home landlines mostly unused? Review all the lines on your account to see what is now excessive. Don’t keep paying for phones just out of habit.

2. Alternative Communication Solutions

If your adult children still need domestic calling, move them to more basic voice-only plans to reduce smartphone data fees. Applications like WhatsApp, FaceTime and Google Voice let you call or message kids without traditional calling plans. Consider dropping landlines altogether and using cell phones with good reception at home. Shop carriers to see if consolidating to two lines on a couples’ or seniors’ plan can save money through discounts.

B. Downsize

More space was likely needed when children lived at home full time. Now with empty rooms, empty nesters can often downsize to a smaller living space. This reduces housing expenses both short and long term.

1. Downsizing Benefits

Moving to a smaller house, condo or apartment has financial advantages. It allows savings on mortgage payments, utilities, property taxes, homeowners insurance and maintenance costs. If relocating to a less expensive area, overall cost of living may decline. Proceeds from selling a larger more expensive home provide savings that can be invested. The minimalism of living in less space is also popular with empty nesters.

2. Tips for Downsizing Successfully

When preparing to downsize real estate, avoid rushing the process. Take time to declutter belongings and get the existing home ready to sell. Research downsizing options like retirement communities if interested. Hire a real estate agent experienced with downsizing transitions. Plan what furnishings will work in the new space. Time the buying and selling process to minimize need for temporary housing. Look for energy efficient features that will reduce utility bills. Focus on location convenience and amenities, not just square footage.

V. Savings and Investments

Without the constant financial demands of raising children, empty nesters have an opportunity to prioritize retirement savings and short-term goals. Boosting contributions now helps ensure adequate income later in life.

A. Redirect Money to Savings

With expenses lowered in many day-to-day budget categories, empty nesters can channel freed-up funds towards increased savings. This both builds retirement funds and financial cushions.

1. Setting Up an Emergency Fund

Financial experts recommend having three to six months of living expenses set aside in case of emergency. If you’ve never been able to build such a fund amid child costs, now is the ideal time. Establish automatic transfers from your paycheck or checking account to a designated savings account. Watch it grow over time to provide peace of mind.

2. Strategies for Saving

Get in the habit of automatically saving a set percent of your salary, such as 10-15%. Sock away annual tax refunds. Build savings by cutting an expense by a certain amount and saving the difference. Have part of your paycheck deposited directly into savings so you don’t “see” that money for easier spending. Take advantage of 401(k) and IRA contributions. Invest windfalls like bonuses or inheritance wisely.

B. Buy Financial Planning for Your Adult Child

Parents devote decades to providing for kids’ daily needs. As they transition to financial independence, consider providing the gift of financial strategy. This sets them up for lifelong stability.

1. Importance of Financial Planning

Despite academic degrees, many young adults lack practical money management skills like budgeting, taxes, investing, and managing credit. Getting expert financial planning guidance early prevents detriments from financial illiteracy. It establishes healthy habits that yield dividends over time.

2. Choosing a Financial Planner

Vet financial planners to find one you trust and feel confident recommending to your children. Ask about qualifications, clients served, services offered and approach. Look for fee-based certified financial planners to minimize sales incentives. Compare several advisors before choosing. Present the planning help as a valuable gift. Offer to pay for the planner as an incentive and show of support.

VI. Legal and Estate Planning

Revisiting legal documents and estate plans ensures assets are distributed according to empty nesters’ wishes later in life. It also allows maximizing inheritance for children and heirs in a tax-efficient manner.

A. Review and Update Your Will and Estate Plan

With adult children established, empty nesters should reevaluate their wills and estate plans to ensure their assets provide for their family as intended.

1. Importance of Updating Documents

Life changes like children growing up, deaths, divorces, moves to different states, or changes in finances all warrant updating legal documents. Wills control distribution of assets, name guardians for minor children, and name executors to oversee the process. Trusts, powers of attorney, and medical directives should also be reviewed.

2. Elements to Review in Your Estate Plan

Verify your designated beneficiaries on retirement accounts and life insurance policies are up to date. Confirm your will names desired executors and heirs, like children, grandchildren, or charities. Adjust details like naming a new guardian for minor children or trustees. Look at estate taxes and structure assets to maximize inheritance. Adjust provisions for distributing personal property. Examine powers of attorney and health directives to confirm the appointed decision makers.

B. Maximize Retirement Contributions

With more discretionary income and a defined time horizon until retirement, empty nesters have a prime opportunity to maximize retirement savings and investment earnings.

1. Retirement Planning Strategies

Submit catch-up contributions to IRAs and 401(k)s which allow higher limits for those 50 and over. Shift a greater percentage of portfolio holdings to stocks for higher returns over remaining time until retirement. Pay down debts so more money can be invested each month. Work longer to increase Social Security benefits. Consider annuities to generate guaranteed lifetime income. Consult a financial planner.

2. Tax-Advantaged Accounts

Max out annual contributions to retirement accounts like 401(k)s, 403(b)s and IRAs to benefit from tax-deferred growth. Contribute to a Roth IRA using post-tax income to enjoy tax-free withdrawals later. If offered a health savings account at work, contribute to save for medical expenses tax-free. Consult a tax professional to optimize decisions.

VII. Healthcare Considerations

With retirement on the horizon, empty nesters need to educate themselves on healthcare options and costs in retirement. Steps taken now help ensure they can afford quality coverage.

A. Explore Healthcare Options

Knowing Medicare eligibility guidelines and costs helps empty nesters make informed choices to supplement coverage. A variety of Medicare plans, supplements and services create possibilities to create optimal coverage.

1. Health Insurance After Kids Leave

Children aging off a family health insurance plan creates a transition point. Covering children through age 26 under Affordable Care Act rules is common. Once they get their own insurance, parents can shift to individual or spousal-only employer plans. Shop for economical options that meet your needs. Consider participating in a health sharing ministry which offers community-funded care.

2. Medicare and Medicaid Considerations

Most Americans become eligible for Medicare at age 65 and enroll in parts A and B. Costs like premiums, deductibles and copays must be planned for. Weigh pros and cons of supplement plans like Medigap or Advantage plans. Lower income adults may qualify for Medicaid to supplement Medicare.

B. Consider Long-Term Care Insurance

Needing long-term skilled nursing care remains a significant risk in old age. Purchasing this insurance early offers lower premiums and better chance of qualifying.

1. The Need for Long-Term Care Coverage

Many retirees require extended care for conditions like dementia or incapacitation. Medicare provides very limited nursing home or home health coverage, so this care is extremely expensive out of pocket. Having insurance shrinks this potential massive expense.

2. Choosing the Right Policy

Consider benefits like policy amount, types of facilities covered, elimination period, inflation protection, and premium costs when purchasing long term care insurance. Shop multiple insurers and compare. Buy by mid 60s for lower premiums. Consider a life insurance-long term care hybrid policy so death benefits pay if care is not needed. Consult a fee-based insurance advisor.

VIII. Quality of Life

An empty nest allows reprioritizing quality of life. With fewer family obligations, empty nesters can focus on enhancing day-to-day enjoyment and checking off bucket list goals. Financial moves support this next life phase.

A. Reevaluate Life Insurance

Income replacement is life insurance’s primary purpose. With earning years winding down, empty nesters likely need less coverage. Downsizing policies saves money long term.

1. Assessing the Need for Life Insurance

Consider if your spouse and children would still depend on your income if you passed away prematurely. If all kids are independent adults, need may be less. But keep in mind final expenses, debts, and leaving an inheritance. Also weigh needs like charitable gifts. A financial advisor can help you find the right balance.

2. Adjusting Coverage Amounts

For many empty nesters, a modest policy just large enough to cover final costs may be sufficient. When dependent children are grown, income replacement isn’t the goal. Consider term life policies for 10-20 years to cover needs at a lower premium. Cash value policies can sometimes be reduced, sold for cash value, or traded for an annuity providing retirement income.

B. Create a Travel Fund

With more free time, empty nesters often seek Adventure and experiences through travel. Setting aside money just for this purpose makes these luxuries readily accessible.

1. Benefits of Traveling as Empty Nesters

Empty nesters are uniquely positioned to enjoy extended travel. Free from child obligations, they can plan any getaway on their own schedule. Second careers wind down giving time flexibility. Disposable income shifts from other priorities to pursuing interests. Travel enriches life experience, creates bonding opportunities, and expands global perspectives.

2. Saving for Travel Expenses

Build your travel fund methodically over time. Establish a separate savings account or CD ladder designated just for vacations. Set aside a percentage of each paycheck, or fund it through a portion of bonuses or tax refunds received. Make it a habit to automatically deposit the same amount monthly. Use windfalls like inheritances or gifts to give the account a head start. Let it compound and grow over a few years until enough is accumulated for a dream trip.

IX. Pursuing Personal Interests

Raising children often requires parents to put their own needs aside temporarily. As empty nesters, they can now focus time and money on individual interests that enrich their days.

A. Invest in Your Hobbies and Interests

Newfound free time allows empty nesters to cultivate hobbies they enjoy. Budgeting intentionally makes these passions more attainable.

1. Rediscovering Interests

Think back to what you enjoyed doing as a young adult or dreamed of trying. Activities like travel, sports, arts, collecting, or volunteering with a cause can enhance mental and physical health. Try new things outside your comfort zone. Combine several mild interests into one bigger passion project. Share your hobbies with your spouse or friends.

2. Budgeting for Hobbies

Build designated hobby funds like you would a travel account. Set aside money from your monthly income allowance so you can engage in interests consistently. Be strategic to make room in your budget. Cut back spending in other categories to find dollars for hobbies. Take cash infusions like tax refunds or milestone birthday gifts and splurge on hobby expenses. Follow hobby sales and retailers for good deals.

B. Explore Part-Time Work or Freelancing

Part-time work or freelance gigs offer empty nesters social connection and supplemental income for pursuing passions. With no dependents, you have flexibility to choose opportunities of interest.

1. Benefits of Part-Time Work

For empty nesters not fully ready for full retirement, part-time work provides purpose while allowing more free time. It maintains job skills and social connections. Income supplements retirement savings. Positions with flexible scheduling are ideal for pursing other interests too.

2. Finding Freelance Opportunities

Freelance or consulting work similarly allows making extra money on flexible schedules. Websites like FlexJobs, SolidGigs and Freelancer provide access to screened remote opportunities in areas like writing, programming, design, customer service and more. Develop a presence on LinkedIn to connect with potential clients. Offer tutoring or coaching in your areas of expertise. Learn skills like bookkeeping or social media management that translate to freelancing opportunities. Talk to other independent professionals to get leads.

X. Home Improvements and Investments

With more equity built up, empty nesters have financial capability to invest in improving their living space to better suit this life stage.

A. Invest in Home Improvements

Free from expenses of raising kids, empty nesters can now budget for projects and updates to enhance their home environment.

1. Home Improvement Projects for Empty Nesters

Remodel an unused bedroom into a hobby room or home office. Update the kitchen and bathrooms with modern features. Finish unfinished spaces like basements for entertaining. Install senior-friendly updates like grab bars and curbless showers. Upgrade features like flooring, lighting and windows. Incorporate smart home technology like video doorbells and programmable thermostats. Build outdoor living spaces like patios and firepits.

2. Budgeting for Home Upgrades

Create a dedicated savings fund for home projects, or use equity from a refinance. Obtain bids from contractors to estimate costs. Make a priority list within your budget. Stretch projects over time so they are affordable. Enlist talents of family to help with upgrades that require skill like plumbing or electric at reduced cost.

XI. Frequently Asked Questions (FAQs)

A. What is an empty nester?

An empty nester is a parent whose children have grown up and left the family home as independent adults. Empty nesters are transitioning to a new life stage between parenting and retirement.

B. How can decluttering benefit empty nesters?

Decluttering helps empty nesters clear out things no longer needed with kids gone, freeing up space in the home. It also allows selling or donating unused items to earn extra income. Decluttering enables downsizing to a smaller living space which saves money. It also provides a psychological fresh start.

C. What are alternative entertainment options to cable?

To save money, empty nesters can replace expensive cable packages with lower cost streaming services like Netflix, Hulu, Prime Video, and Disney+. An HD antenna gets broadcast TV stations over the air for free. Individual channel subscriptions through services like Sling TV allow customizing a smaller channel bundle.

D. How do I assess the need for selling a car?

Look at how often you currently use each vehicle. Can you share one car? Do both spouses commute to jobs? Are extra vehicles sitting idle most of the time? Do you have recreational vehicles used infrequently? Analyze needs and usage to determine what vehicles you can live without.

E. What should I consider when updating my insurance policy?

Remove any adult children over 25 from auto and health insurance plans if they have their own coverage. Increase health plan deductibles to lower premiums if deductible costs are more affordable than premium savings. Drop unnecessary life or disability policies. Ask about discounts for bundling home and auto insurance. Insure valuable collections acquired over time. Review needs annually.

F. Why should I drop extra cell phones?

With adult kids now independent, paying for their phones is an unnecessary expense. Most young adults only need basic voice and texting if keeping a shared family plan. But unlimited data plans can be costly. Evaluate if kids can be moved to their own independent calling plans to save money.

G. What are the advantages of downsizing?

Downsizing housing reduces expenses for mortgage payments, utilities, taxes, insurance, maintenance and repairs. Lower housing costs may allow moving to a location with lower overall cost of living. Proceeds from selling a larger home can be invested. Less space is easier to clean and maintain. Moving to a smaller community may reduce auto costs and bring amenities like activities closer.

H. How do I set up an emergency fund?

An emergency fund should contain 3-6 months of living expenses. Establish a separate high yield savings account. Set up automatic recurring transfers form checking to savings when you pay bills. Start small if needed, with $25 or $50 per pay period. Increase the amount transferred as the balance grows. Let it accumulate over time until you’ve reached your savings goal.

I. What is the role of a financial planner?

Financial planners create strategies and recommendations tailored to individual needs on money topics like budgeting, debt, saving, investing, insurance, taxes, and estate planning. Their guidance helps identify areas needing improvement and sets clients up for financial success by developing good money management habits.

J. Why should I update my will and estate plan?

Major life events like children growing up, divorces, new marriages, relocations, or financial changes necessitate reviewing documents to ensure your assets are distributed as desired in case of your death. Update details like named beneficiaries, executors, guardians, trustees and bequests.

K. How can I maximize my retirement contributions?

Make the maximum allowable salary deferral contribution to workplace 401(k) and similar plans. Contribute the annual limit to IRAs. Make catch-up contributions if 50+. Shift portfolio to more stocks. Pay down debts. Work part-time in early retirement. Consider postponing your Social Security claim for as much time as you can. Purchase annuities to generate guaranteed lifetime income.

L. What healthcare options are available for empty nesters?

Those under 65 can enroll in Affordable Care Act health insurance plans if employer coverage ends. At 65, Medicare eligibility begins, allowing enrollment in Parts A and B. Medigap plans help cover costs like copays and deductibles. Medicare Advantage plans provide all-in-one coverage. Delaying Part B enrollment helps avoid penalties if still employed with health insurance.

M. Why consider long-term care insurance?

Long-term skilled nursing care averages $7,500-$8,500 per month, presenting a huge expense if care is needed for an extended time. Long-term care insurance covers all or part of these costs to protect savings. Buying in your 50s-60s brings lower premiums. Policies cover in-home care, assisted living and nursing home care.

N. Do I still need life insurance as an empty nester?

The need for life insurance decreases as children become financially independent adults. A small policy to cover final expenses is likely sufficient. Consider term life insurance for 10-20 years to cover needs but minimize cost due to advanced age. Permanent cash value policies can potentially be reduced in coverage or sold back to the insurer.

O. How can I budget for travel as an empty nester?

Establish a dedicated savings account for travel expenses. Automatically deposit a fixed amount monthly, or allot windfalls like bonuses and refunds. Reduce spending in other budget areas to find money for the travel fund. Let the account grow over several years until enough is accumulated for a major trip or vacation home purchase.

P. What are the benefits of pursuing personal interests?

Empty nesters have more time to focus on individual passions and hobbies. Pursuing personal interests provides enjoyment and enriches life. It improves physical and mental health through activity and social connections. Work like freelancing or part-time jobs allow earning extra income while pursuing interests.

Q. How do I find part-time work or freelance opportunities?

Websites like FlexJobs, SolidGigs and Freelancer connect professionals to screened remote work in many fields. Develop an appealing LinkedIn profile and network to find consulting opportunities. Consider freelancing in your areas of expertise. Acquire in-demand skills like social media management or bookkeeping. Ask friends and colleagues if their companies have project work.

R. What home improvements should I consider?

Remodel unused bedrooms for hobbies or guests. Update kitchens and bathrooms. Finish basements for entertaining. Install age-friendly features like walk-in showers. Improve exterior spaces like patios for relaxation. Upgrade flooring, lighting or windows. Add smart home technology conveniences. Budget using savings, home equity, or stretch over years.

S. How can I budget for home upgrades?

Create a savings fund for home improvements. Save a fixed amount from monthly income contributions. Take advantage of windfalls like bonuses or tax refunds. Use a cash-out mortgage refinance to access home equity at low rates. Obtain several bids to estimate costs for priorities. Stretch bigger projects over years to afford. Save on labor costs by enlisting help from handy family.

XII. Conclusion

A. Recap of Smart Money Moves for Empty Nesters

Becoming an empty nester marks a pivotal life transition. As daily parenting duties decrease, new time and money resources become available. By revisiting finances with a strategic eye, empty nesters can take important steps to align this new life stage with their vision for the future.

B. Encouragement for Financial Independence and Enjoyment

Making smart money moves helps empty nesters gain financial freedom and flexibility to focus on personal goals. Decluttering and downsizing housing reduces expenses. Trimming insurance, utilities, phone bills and transportation creates savings. Boosting retirement contributions, emergency savings and estate planning helps ensure future security and inheritance for heirs. Budgeting for interests, hobbies and travel enhances enjoyment of life’s next chapter.

While the transition can be bittersweet emotionally as the active parenting role decreases, empty nesters have much to look forward to. With prudent planning and redirected finances, this life stage can be an enriching period lived to the fullest. By implementing the right financial strategies, empty nesters can gain confidence that they can live comfortably, leave a lasting legacy and pursue dreams put on hold while raising a family.

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