Experiencing empty nester syndrome can be challenging for many parents, as it brings a mix of pride and loss, relief and sadness. It’s essential to understand that these emotions are both common and normal, typically subsiding within a few months.1 Whether you’re gearing up for, navigating through, or embracing an empty nest, adapting to this new chapter in life may require some effort on your part. In addition to potentially exploring empty nest activities such as new hobbies, rekindling old passions, and prioritizing your physical and mental well-being, it’s also important to closely review and adjust your financial situation as needed.
Here are 10 tips for empty nester financial planning that can help you experience a financially secure — and hopefully happy — phase of life after the kids have left home.
1. Managing cash flow. As a true empty nester, with kids living independently, you should have more income to save after lowering household expenses, such as groceries and utilities, and maybe being free of college costs.
- Consider increasing your savings rate to bolster your retirement preparedness. With proper planning, you may be able to retire sooner than expected.
- Review your income and expenses to determine where you might make changes to achieve your financial goals. Paying off bad debt such as credit card balances is a good place to start. After that, you can increase the balance of your emergency savings to cover six to 12 months of living expenses.
- Be mindful of excessive spending; it’s easy to indulge in travel, home renovations, and dining out without monitoring how these larger or frequent expenses affect your cash flow.
2. Reevaluating taxes. There are multiple strategies you might consider for mitigating tax liabilities as an empty nester.
- Consider the potential loss of tax credits or deductions without dependents. Adjusting expectations and withholding may be necessary.
- Reap the benefits of putting money into charitable giving. Another strategy that can help with maximizing savings is tax diversification.
- If you’re considering paying off your mortgage, make sure this move is more feasible for your situation than, for instance, contributing additional funds to investment accounts.
3. Bolstering other investments. When it comes to investing, there’s strength in diversification.
- If you haven’t reviewed your portfolio lately, not only should you consider bolstering funds, but you may also want to take the time to rebalance your investments. Also, your risk tolerance may be different now that the children are on their own and you have an empty nest.
- Unsure if you should make changes to your portfolio? Speak with your advisor. If you don’t have one, we are happy to help.
4. Maximizing retirement savings. If you’re still working, you might want to consider maximizing your employer-sponsored 401(k) account or taking advantage of catch-up provisions with an individual retirement account (IRA).
- The design of the 401(k) account may have factors that can help you decide — for instance, if the plan has funds with high expense ratios. It’s worth looking at all your options to see if the right one for you is a traditional 401(k) or Roth 401(k), or a traditional IRA or Roth IRA.
- If you have leftover funds in a 529 college savings account, as of Jan. 1, 2024, you can rollover the funds into the beneficiary’s Roth IRA without tax penalty.
- If you’re a Mercer Advisors client, your advisor can also manage your employer sponsored 401(k) plan as part of your overall investment strategy. Connect with your advisor for more information. If you’re not a client, contact us for more information.
5. Planning your estate. With only 33% of U.S. adults having an estate plan, it appears that this is an area that a majority of people find uncomfortable or unnecessary.2
- Planning in advance can minimize the impact of taxes for your beneficiaries, as well as help them avoid family disagreements and excessive expenses. There are four key documents that can help you take control of your estate plan: 1) revocable living trust with a pour-over will, or a last will and testament; 2) financial power of attorney; 3) healthcare power of attorney and living will; and 4) HIPAA authorization. If you already have a trust or will, review and update the documents to reflect your current goals as an empty nester.
- Now that your kids are adults, if you haven’t already discussed your end-of-life plans, then taking the time to have this conversation can help provide greater reassurance for everyone. Download our Family Records Workbook and consider filling it in and providing a copy to each of your adult children.
6. Health care and long-term care costs. As you age, health care costs could be a significant concern.
- Investing in a health savings account (HSA) is similar to investing in a retirement account. You’re not taxed on contributions and any distributions used for qualified medical expenses are tax-free. One qualified expense is paying Medicare premiums.
- Long-term care insurance coverage can help reduce the financial and emotional burden on your children. Insurance can be purchased as a stand-alone policy, or you can purchase a long-term care rider with your life insurance. The costs usually depend on your current age, health, and gender but considering the high expenses with long-term care, the coverage can be worth it now that you have an empty nest.
7. Downsizing or relocating. The need or desire for a single-family home and sizeable yard may not exist anymore.
- You might consider moving to a smaller home with less utility costs and upkeep. Maybe your lifestyle will dictate whether you want easier access to empty nester activities that some communities might offer, such as landscaping or fitness centers. But be sure you think about all the financial, practical, and emotional implications before deciding to move.
- State taxes should be researched if you’re motivated by lower income taxes, or estate and inheritance taxes. Each state has very different tax laws that can impact your income and cost of living. Now that you’re an empty nester, your tax tolerance may be different than when you were raising kids.
8. Review insurance policies. Ensure your insurance coverage aligns with your current needs and future goals.
- Explore your health insurance options, especially if you’re planning to retire before age 65, including COBRA, government-sponsored plans, private insurance, or a spouse’s employer-sponsored plan. Also consider keeping or obtaining disability insurance until you retire, possibly through your employer. Even as an empty nester, you may have significant financial obligations.
- Life insurance can provide financial security for your surviving spouse and leave a legacy for your heirs. Becoming an empty nester is a good time in life to reevaluate your insurance needs. If you don’t already pay for a policy, one may be available through your employer along with supplemental coverage. Otherwise, you may look at purchasing term or permanent life insurance on your own or reducing your current insurance coverage to better match your current situation.
- Mercer Advisors integrates insurance into our comprehensive wealth management solution as part of your overall financial life. If you want help with insurance solutions, let us know.
9. Supporting adult children. It can be challenging to balance your personal financial goals with the financial support you may need, or want, to provide your child.
- Instill in your children the value of financial independence for themselves as well as for you. Every dollar you give your adult child is a dollar you could invest to help preserve your financial security as an empty nester.
- Wealth is not just about financial security but also about making a meaningful impact and living a purposeful life. If you have a wealth advisor, connect your kids with them to get an early start on achieving financial independence and avoiding financial mistakes.
10. Caring for aging parents. You may find yourself caring for one or more parents who cannot take care of themselves anymore, whether financially or physically, and possibly reversing your empty nest status.
- More than 53 million people are taking care of a friend or family member, with the majority of caregivers between ages 50 and 64.3 If your parents don’t have a financial plan, having one can help protect you too.
- Look into available tax credits such as the dependent care credit. If your parents are on Medicare and you are paying their expenses, such as medical, you may be able to claim them as dependents.
Get advice
Being an empty nester should be a joyous time to focus on yourself after years of dedicated parenting. With more time on your hands, it’s important to invest in relationships, causes, exercise, education, or whatever brings you happiness. However, don’t overlook your finances — following these 10 suggestions can provide lasting benefits for years to come.
If you want more guidance on empty nester financial planning, Mercer Advisors offers a comprehensive and integrated wealth management solution with financial planning, investment management, tax, estate, insurance, and more. We’ll select the advisor that’s right for you because it can be helpful to have an advisor who has experience with clients like you. Let’s talk.
1. “How to Manage Empty Nest Syndrome,” WebMD, April 9, 2023.
2. “Estate Planning Statistics to Read Before Writing Your Will,” LegalZoom, July 30, 2024.
3. “Caregiver Statistics: A Data Portrait of Family Caregiving in 2023,” AARP, March 8, 2023.
