Becoming an Empty Nester
The transition period between sending your kids off to college and approaching retirement can be difficult to navigate emotionally and financially.
Potential Direct Financial Impact
- Potential cashflow may be available to redirect toward goals from money spent feeding, housing and entertaining your kids.
- Catch-up contributions to your retirement accounts may be necessary.
- Possible need to balance mortgage (or other debt) acceleration with saving for retirement.
- Any costs associated with funding college tuition and/or living expenses for your kid(s) out of pocket.
- Potential costs associated with securing long-term care insurance and/or buying an annuity to create a fixed income stream during retirement.
Potential Secondary Impacts
- Potential lifestyle impact from the need to reduce expenses (and/or downsize) to save more and get on track for retirement.
- Possible career change and/or return to the workforce if you left to raise your kids.
- The need to plan for long-term health care costs and estate planning.
- The need to evaluate stable sources of retirement income, like your expected Social Security benefits.
- The need to re-evaluate your life insurance coverage and look into the remaining length of any existing term policies.
- Possibility of cutting expenses that are no longer needed (ie. premium cable package, health insurance for your kid(s) if provided by their college or employer)
Self Completion/Execution Risks
- Inflating your standard of living once cash flow is freed up from your kids moving out of the house.
- Sacrificing your own retirement at the cost of funding college for your kids out of pocket, when they can take out student loans.
- Not paying off your mortgage (or downsizing) before you retire.
- Not contributing enough to be on track for retirement.
- Not taking advantage of the most tax-advantageous retirement vehicles
- Not having an appropriate investment mix based on your objectives, risk tolerance and time horizon.
- Not having a clear plan for when you what to retire and how much you want to replace each year during retirement.
Situations where expertise adds the most value
- Tax Adviser
Consulting a tax adviser may be helpful to determine the optimal retirement accounts to minimize your taxes now and during retirement as part of your overall withdrawal strategy. Additionally, a tax adviser may be able to identify other tax-advantaged vehicles to contribute to for retirement purposes once you’ve maxed out your 401(k) plans.
- Legal Adviser
Working with a trust and estate attorney may be beneficial to set up estate planning documents and wealth transfer strategies to plan for future generations.
- Financial Adviser
Working with a financial adviser as you approach retirement is highly recommended to not only assess your retirement readiness, but also to put together a comprehensive financial plan that helps you balance any competing financial goals. Additionally, a financial adviser may be able to help you create an updated budget that enables you to save more each month.
- Tax Adviser