Money and Marriage: Creating an Updated Financial Plan as an Empty-Nester Couple
For many couples, the transition from parenting young children to becoming empty-nesters is both exciting and challenging. While the idea of having more time for each other is appealing, there’s a lot to consider when it comes to managing your finances. With your children either heading to college or already out of the house, the dynamics of your household budget have shifted significantly. Now’s the time to reassess your financial situation and make sure your goals are still aligned, both as a couple and individually.
Here are a few key areas to focus on when creating or updating your financial plan as an empty-nester couple:
1. Reevaluate Your Budget and Cash Flow
With the kids off to college or living on their own, it’s a great time to reassess your household budget. You’ll likely have fewer expenses related to things like daycare, school supplies, and extracurricular activities. However, the new reality of paying for college tuition or helping out with living expenses can add up. Take a deep dive into your spending habits and make sure you’re on track for your new financial reality. This is also the perfect time to allocate more towards savings or investing if you find you have surplus funds available.
2. Review Your Retirement Goals
Now that your kids are more independent, it’s a good time to take a step back and look at your retirement plan. Are you on track to meet your retirement goals? Have your priorities shifted in the last few years? Empty-nesters often find themselves with more disposable income, so consider taking advantage of this opportunity to boost your retirement savings. It may be time to increase your 401(k) contributions or set up an IRA if you haven’t already. The goal is to ensure your retirement years are financially secure, and now’s the time to set that plan in motion if you haven’t already.
3. Plan for College Costs—Now and Later
For many affluent families, helping their children with college costs is a priority, but the timing of those costs can vary. If your children are already in school, you’ll need a strategy for managing tuition payments, loan repayments, or even supporting them in graduate school. If they’re still in high school, now’s the time to figure out how you want to approach the next few years. Should you be saving more in a 529 plan? Do you have the financial flexibility to assist with living expenses, or should they be more financially independent? Planning for both the short-term and long-term needs of your children’s education can help reduce the stress of managing their financial future.
4. Debt Management: Paying Off Loans and Mortgages
As your children leave the nest, you might be looking at your debt situation and asking, “What’s next?” Now is the perfect time to take stock of any remaining debt, whether it’s your mortgage, credit card debt, or student loans. If you’ve been focusing on your children’s education and haven’t had the time to tackle your own debt, this is the moment to develop a strategy. Consider accelerating payments on high-interest debts or refinancing to lower rates, and prioritize paying down debts as part of your overall financial strategy.
5. Insurance: Do You Have the Coverage You Need?
As your life stage changes, so do your insurance needs. Are you still carrying the same level of life insurance you had when your kids were younger? Are your beneficiaries still up to date? Do you need to adjust your coverage for long-term care? As empty-nesters, you may have different priorities when it comes to insurance. Take the time to review your policies and ensure they align with your new life stage. It may be worth considering adding or changing coverage for health, life, disability, and long-term care insurance as your needs evolve.
6. Plan for Your Next Chapter—Travel, Hobbies, and New Goals
With the kids out of the house, you and your spouse may have more freedom to pursue things you’ve put on hold over the years. Whether it’s travel, starting a new hobby, or embarking on a second career, now’s the time to think about what comes next. This can be an exciting time to create new shared goals as a couple. Factor these lifestyle changes into your updated financial plan, whether it’s saving for travel or rethinking your spending habits to support new endeavors. Your financial plan should reflect both your current needs and your vision for the future.
7. Create a Long-Term Estate Plan
As your children move into adulthood, it's important to revisit your estate planning strategy. This may include creating or updating a will, establishing a trust, or deciding on powers of attorney. Ensuring that your financial and healthcare wishes are clearly documented will give you peace of mind. It’s also important to talk with your children about the plan and any future financial responsibilities they may inherit. A solid estate plan not only ensures that your wealth will be distributed as you wish but also provides the next generation with a roadmap for managing that wealth.
8. Consider Philanthropy and Charitable Giving
Empty-nesters often feel a strong desire to give back. Whether it’s through donations to charitable organizations or setting up a foundation, philanthropy can become an important part of your financial plan. There are tax benefits to charitable giving, and it can be a fulfilling way to create a legacy. Consider working with your financial advisor to explore ways to incorporate giving into your overall strategy, whether through donor-advised funds, charitable trusts, or direct contributions.
The transition into the empty-nester phase is a major milestone for couples. It’s an opportunity to reassess your financial goals, ensure you’re on track for retirement, and consider how best to support your children and your future as a couple. It’s important to revisit your financial plan regularly, especially as life circumstances change. This month, take some time with your spouse to talk about what the future holds and how your finances can help you achieve those goals. The time to plan is now, and your future self will thank you.
Please Note: The information contained in this blog does not purport to be a complete description of the securities, markets, or developments referred to in this material. Any opinions are those of Jeff Green and not necessarily those of Raymond James. Expressions of opinion are as of this date and are subject to change without notice. Investing involves risk and you may incur a profit or loss regardless of strategy selected, including diversification and asset allocation. Past performance does not guarantee future results.
