The life transition of becoming a parent with an empty nest is a life transition that is not often talked about (at least not much as we analyze the impact of other major life events, such as getting married, having children, and retiring). However, the act of your children leaving home has emotional and financial reverberations that rival all of the other big events in your life.
Here are some tips for enjoying the empty nest, in addition to some ideas about how to use this stage of your life as a good building block for the next big phase: a secure and happy retirement.
Emotional reactions to sending children off into the world can vary greatly. Some people experience empty nest syndrome; they feel sad and lonely when their children leave home. However, for many, the anticipation is far worse than the reality.
In fact, many empty nesters actually experience relief and some greater degree of happiness once their children fly the coop.
No matter how you feel, it can be a good idea to acknowledge those feelings and assess how your emotions impact what you are doing. For example:
- If you feel sad about the empty nest, you might compensate by trying to spend money or time on the children who have left.
- If you are ecstatic about your newfound freedom, you might overspend on travel or vacation homes.
You might think that once the kids are out of the house, you will have tons of money to put toward retirement. However, the average amount that empty nesters put toward their 401(k) savings once their kids move out of the house doesn’t always increase dramatically.
Once your kids are out of the house, focusing on saving is vital to a successful retirement, explains Tony Madsen, a certified financial planner and president at NewLead Financial Guidance, located in Redwood Falls, Minnesota.
The amount you’ll need to save for retirement varies depending on personal circumstances and the age of your children. “Your kid may be out of the house, but if you are still having added expenses like helping them with school or housing, you may not be having that cash to put into a savings account for retirement,” Madsen says.
To help bolster your potential savings, Madsen suggests the following:
- Save to your company match in any retirement plan
- Max out your savings allotment in your Health Savings Account (HSA), if applicable
- Save to your individual retirement account (IRA) and 401(k) account
“Though saving for retirement should be high on your list, paying off your outstanding debt should be at the very top,” Madsen stresses. “Your priority should be to retire as much debt as possible before retirement,” he says.
The interest rates you are paying on your debt are likely higher than the potential rate of return you might receive on additional savings. So, it makes sense to pay off the debt.
If you are curious about the trade-offs of paying down debt versus saving more for retirement, try the NewRetirement retirement calculator. Once you have entered some initial data, you will be able to try out different scenarios and compare outcomes.
Yes, saving for retirement and paying off your debt is important, but you shouldn’t let that eliminate all of the fun you want to have, explains Madsen.
“In the first year of empty nester status, you have to have a little fun with your money too,” says Madsen. “If there’s something you want to do, I always recommend doing it in the first year.”
There is no time like the present, and you do not want to have regrets about not doing the things you want to do.
Too many people wait until retirement to have all the fun. However, while you are still working you can better afford to take a long vacation or buy a vacation home, and still have time to add to your retirement fund, Madsen explains.
“Our country is all about working and saving for retirement, which is very important, but once people get near there, they need to be able to have some fun too,” he says.
When your kids leave, managing your money may not necessarily become easier. But if you prepare in the correct ways leading up to this point, and know exactly what you need to accomplish before retirement, you will be more likely to enjoy your time as an empty nester.
One of the big balancing acts in life is enjoying now but also planning for the future.
You should certainly try to enjoy your empty nest, but now is also the time to get very serious about your retirement plan. A good retirement calculator can help you answer the important questions like: When can I retire? How much do I need? Can I afford health care?
Armed with this information, you can set yourself up for a successful future.