12 Financial Moves New Empty Nesters Must Make

Becoming an empty nester can be an exciting time in your life, full of new adventures, plans, and goals. It’s also the perfect time to examine your finances and set yourself up for a stress-free retirement.

So as you prepare for this big life change, here are some key financial moves new empty nesters must make.

Kids can be expensive. Raising a child through the age of 17 typically costs more than $230,000, according to a 2017 study by the U.S. Department of Agriculture.

When your last kid moves out, it should free up a decent amount of cash each year. Take this chance to review your budget and see where you can use that money to start investing or find other ways to maximize your financial goals.

Becoming an empty nester marks the perfect time to check in on your overall financial health.

Getting professional advice from a financial advisor might help you decide on the best ways to allocate your money during these last few years before retirement.

Now that fewer people are living in your home, you may be able to downsize and shed some of your expenses. Larger homes typically come with higher bills for lawn care, utilities, and property taxes.

Swapping your current home for something smaller might reduce these costs. If you have lived in your home for a while, you might even reap enough profit when you sell to put some extra money toward retirement savings.

Reducing or eliminating your debt can put you in a better financial situation.

Whether you have credit card debt, medical debt, car loan debt, or mortgage debt, using your extra cash to pay off these balances will improve your monthly cash flow. Paying down balances will save you money on interest, too.

Here is some good news if you are at least 50: You can use catchup contributions to max out your retirement accounts.

For 2024, the IRS limit on 401(k) contributions is $23,000. But those who are 50 or older can add an additional $7,500, for a total of $30,500.

Once you have maxed out those accounts, you can still put away money in savings or other investment accounts to fund your retirement.

Many empty nesters still support adult children financially. But this can put the parents’ own financial health at risk. So, it might be time to make a change.

Start by having a conversation with your children and mapping out how they can achieve financial independence. This may take some lifestyle adjustments or creative planning, but it will help them create their own financial security.

Once you have withdrawn financial support, you can direct that money to other places.

Now is the time to put an estate plan in place. This will include your will, beneficiary designations, power of attorney, and any other information your family needs to know if you die or become unable to make decisions for yourself.

If you already have an estate plan, you probably need to update it now that you no longer have minor children living at home. It’s also a good idea to share your estate plan with your adult children to prevent any feelings of surprise or resentment after you die.

An emergency savings fund should be kept separate from your other accounts. Consider using a high-yield savings account for this fund so you can earn a little interest.

The exact amount you need will vary based on lifestyle and expenses, but a good general recommendation is to save enough so you can cover expenses for between three and six months.

As your family dynamic changes, so does your need for insurance.

Take a look at your car, homeowners, and life insurance policies. You may need to change your coverage amounts or terms or update the beneficiaries. You might even save some money after making these adjustments.

This is the perfect time to clean out the basement or crawl space and get rid of anything you are not using. Having a garage sale is always an option, but consider listing and selling in online marketplaces too.

If you have been keeping scrapbooks, collections, or other valuable memorabilia for your children, you can give it to them now to enjoy — and free up some space in your home.

Consider the long-term impact of your spending before you splurge by using your newfound funds.

Renovating the house or buying a shiny new sports car may sound great, but excess spending now could negatively impact your standard of living during retirement.

There are plenty of ways that becoming an empty nester can help you get ahead financially. However, don’t forget about additional expenses that might pop up.

If your child formerly was helping with household chores, you may need to hire help to keep up with the housework. You may also need to increase your travel budget to account for weekends and holidays spent visiting your kids at their new home.

Financial advice along the lines of “save more money” and “get out of debt” may sound unexciting, but these financial principles are helpful for many people, including empty nesters.

As you head toward your golden years, you want to be prepared. Parents often put their kids first, but now is the time to take your own financial health seriously.