Flying the Coop: Planning for an Empty Nest
Kathy Longo, CFP®, CAP®, CDFA Wednesday, 28 June 2017
When your child(ren) leave home for the first time, the transition to having an empty house can be challenging. It can also be very exciting! Similar to retirement, divorce, or any life transition, the range of emotions can vary and how you manage your time, feelings, finances and relationships through that transition can have an impact on your well-being and lifestyle.
Having a child is a life-changing event. So is having a child leave home. Being mindful of what you are feeling and the impact this transition is having on your mood and your day-to-day activities is important. Finding positive and healthy ways to manage your time like exercising, taking a class or simply doing something that you love can help improve your mood and allow you to make the transition with greater ease. If you have your sights set a bit higher, taking stock of your finances and your goals will help you and your spouse find empowerment in your new independence as empty nesters.
Revisiting your Financial Plan
If you begin to look around at the space in your home and realize it’s time for an upgrade—or if you want to use the extra time to go on an adventure—then you need to make sure you have the finances in place to support your dreams. It is also important to understand which accounts you may want to use to fund certain activities so that you avoid overpaying taxes. Consulting with a financial professional about how to create an effective budget and withdraw assets to minimize your tax burden is advisable when making any major purchase or investment.
Many of the assumptions underlying your financial plan may now be obsolete. College tuition payments may be over. You might have more living space than you need or want. You have more time to travel and pursue hobbies. Spending some time thinking about what you’d like to do next can help you determine what you’ll need to do with your finances in order to facilitate those goals.
Planning for Retirement
Kids leaving home is also a great opportunity to straighten up your finances in anticipation of retirement. For instance, many empty-nesters focus on paying off outstanding debts, such as their mortgage, to reduce monthly expenses. Equally, many choose to pay additional sums into their retirement accounts to give them a boost before they start withdrawing from it.
The most important thing to do if you find yourself in this situation is to draw up a list of financial goals. This will help focus your mind on what you’re looking to achieve. You can then break down your finances as they currently stand, to take a view on where your spending can be adjusted to help you save or pay off debt. A financial advisor can provide helpful perspective and support a dialogue to confirm your long-term goals.
When planning for your financial future, you should also think about how your expenses would change if your child(ren) moved back in. Many youngsters today operate in a ‘boomerang’ fashion, in which they move out for work or education, but then move back home to save money for their first property purchase.
Consider whether you can afford to cover the cost of an extra person living under your roof again should they choose to move back in. Determine whether or not you need to charge them rent. This may also be a question of wanting to charge them rent; to convey the message that contributing to the home in which they live, as an adult, is important. As much as you want to help your child(ren) out, it should not be at the cost of your own financial security.
Focus on You
After many years of caring for your child(ren), now can be a time where you have the opportunity to focus on you. Though this can evoke feelings of discomfort at times, it can also help you rediscover the things that make you happy beyond being a parent and caregiver. Having a plan to make these discoveries can help you feel more comfortable with your newly found free time. If you need assistance with this or any other life transition, Flourish Wealth Management specializes in transition planning. We are here to help you plan for your future wealth and well-being.
About the Author
Kathy Longo brings over 25 years of expertise and experience to Flourish Wealth Management. Kathy is wholly dedicated to improving the life of each client and finds joy in making complex matters simple and easy to understand. She excels at asking the right questions, uncovering new possibilities and implementing the most advantageous strategies for success. Playing such a pivotal role in her clients’ lives remains an honor and a privilege. After earning a degree in Financial Planning and Counseling from Purdue University, she began her career at a small firm in Palatine, Illinois where she worked directly with clients while learning to build a viable, client-centric business. Over the years, she gained extensive knowledge and wisdom working as a wealth manager, financial planner, firm manager and business owner at notable, various sized companies in both Chicago and Minneapolis.