There are chapters of life we are always hurdling toward, and before we know it, they’re upon us. Now, I’m not an “empty nester” yet; I’ve got at least eight years or so before I have any spare bedrooms open up, but as a family financial planner operating in Boston for decades, I’ve worked with clients whose kids have transitioned from OshKosh B’gosh to frathouse formal wear. So, I’ve witnessed all sides of the emotional and financial preparedness of parents becoming empty nesters.
It’s hard for parents to comprehend how they’ll feel once they realize the nest is empty. Some parents look forward to the empty nest for years, and others are more apprehensive about seeing their children off. No matter where you fall on that spectrum, there are questions that you should ask yourself before that day arrives, as well as others that should be considered once it’s happened and time has passed.
Pre/Post the Empty Nest
The financial foundations laid when children and parents are young can ultimately impact the empty nest decisions made decades later. Some of the most impactful saving and investing planning happens long before retirement/empty nests begin. Contributions to IRAs, 401ks, and strategies for long-term successful investing are pivotal for the empty nest stage of life. While for most, the bulk savings don’t happen in these early years, it’s when the strategies for the future are put into place, which is why family financial planners for young families are important to work with.
Once the kids are out of the home/out of college, parents are usually in a stronger financial position, as their careers are higher paying, their pensions/retirement plans are fully optimized, their mortgage may be close to being paid off, and a period of bulk saving for retirement enters an expedited growth phase, advisors sometimes call this period a time of “catch-up provisions” as many investment vehicles are in motion allowing for bulk saving. Regardless of higher paychecks, questions still need to be asked.
Questions to Ask After The Big Day Arrives
I’ve been told there’s a shock that arises when the nest starts to clear out, especially if all the fledglings (kids) depart simultaneously. What was once a bustling house is now quieter, and suddenly, parents have more time for themselves and time to potentially pick up new hobbies and activities to do in their downtime (who would have pictured that!?)
It may not be for months or even years after the fact, but some financial decisions and lifestyle changes will become more evident after the kids leave home and the youngest born exits college.
Here are a few questions that I ask of my clients:
Do you still need all the space?
Your home may be something long in the family, passed down for generations that holds tremendous sentimental value, or it could be a place relatively new to the family and never considered for the long term. Either way, space opens up when the nest empties, and unless the home is a leave-on asset, it can make sense to downsize and find a place to live that’s more suitable for two people. Maybe something with an HOA won’t need constant work and renovation?
If you still have a mortgage, will it eat into your retirement?
Are your property taxes, homeowners insurance, and utility bills going up yearly even though less of the home is being utilized? Will the cost of living in your current home eat into your retirement savings?
Quick example:
The rule of thumb is you can draw 4% comfortably from investments as income. Let’s reverse-engineer the impact.
- Two scenarios: you have a $1,000,000 house with a $500,000 mortgage – 20 years left with a monthly payment of $3,000 OR a $500,000 condo in a great location and no debt.
- Annual living expenses (not including the mtg) – $64k
- Annual social security – $30k
To generate the $34k for living expenses after social security, you’d need $850,000 saved versus the $1,750,000 if you still carry the mortgage.
Are you okay with moving to a different community/region?
Do you have a second home a smaller vacation home? Can you finish your career working remotely from home on the Cape or near the mountains in VT? Are you okay with being further from the cities and busier townships? Are you good with smaller-town living?
Some parents/grandparents will downsize twice. For example, they’ll downsize the property and stay local once the adult kids are fully out of the nest. Then, they’ll move again 5-10 years later to be closer to the kids and grandkids.
Would you like to retire earlier?
If you and your partner are five years away from retirement, would you consider downsizing and retiring early? If you could retire earlier, would that excite you, or would you rather keep working? Are you okay with trading two properties for one and downsizing by selling the vacation home and the primary residence to get an earlier jump on the retirement lifestyle?
These questions won’t be understood/prompted immediately, but they become more evident after a year or two into the empty nest stage. Speaking with an authority on Boston wealth strategies and asset management can help you enter retirement with a better perspective and make more informed decisions, maybe even get a few years back.
All empty nesters will have different goals and desires, but speaking with a professional who is well-experienced with all the variables can help provide clarity and direction.
Please click the link below to discuss your retirement and empty best goals.
Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual.
