It can be the best of times and it can be the worst of times.
When the kids head off to college, you will find that the move will have an impact on your finances and how you handle those changes may well have an impact on your future, according to The Cross Timbers Gazette in “Financial Considerations for Empty Nesters“.
Suddenly all that cash on hand that used to go toward allowances, lunch money, shopping for clothes, gas money and your kid’s cell phone bill, is staying in your bank account. It’s tempting to do some “catch up” spending and indulge yourself in all the things you’ve put off, waiting until the kids were grown. However, this is a unique opportunity to bolster retirement savings and build up (or build back) the emergency cushion that so many of us forget we need—until there’s an emergency.
There’s always the temptation to help the kids out, as they set off on their new lives as independent adults. That’s a great thing to do if you and your retirement accounts can afford it. Consider putting a time limit on any continuing support, like paying a monthly phone bill or a credit card bill.
In some instances, kids never become completely financially independent. If you are in a position to fund them, that’s great. If they have disabilities that limit their earnings abilities, you may want to look into what social service programs are in your area that may help with finding safe and affordable housing, social programs and other services.
Make sure your estate planning attorney and your financial advisor are aware of your plans, if they include continuing to support your children. This may impact your estate plan and investment choices.
Now, have some fun. It’s time to focus on you and your spouse. Make a budget and figure out how much you can reasonably afford to spend on a special vacation or to fix up the spare room.
If you haven’t updated your will, since the last presidential election, put this on your “before the holidays” list. There have been many changes to tax laws and your life may have experienced some changes as well. Review your estate plan with your estate planning attorney to be sure you aren’t missing any opportunities to minimize taxes or maximize your planned giving legacy.
This is also the time to check on your beneficiary designations. If the last time you looked at them was when your now adult children were small, you definitely need to make a complete list of all of your accounts that have beneficiary designations and make sure they are up to date. If you haven’t checked them since before you were last married, it’s time.
Now that the kids are grown, it’s a good time to revisit your power of attorney and health care proxies. If your child is responsible enough, you may want to name your child as your agent. Accidents happen, and we never know when we might become incapacitated.
An estate planning attorney can advise you on creating an estate plan that fits your unique circumstances, including the impact of becoming an empty nester.
Reference: The Cross Timbers Gazette (Sep. 10, 2018) “Financial Considerations for Empty Nesters”