Once your children are out of the house, your financial situation may change drastically. Your expenses tend to drop significantly, but you also must start planning for this next phase of life. Do you have life insurance to protect your partner and adult children? Are you meeting your retirement goals? Should you downsize or move? This article will dive into four financial moves to make as an empty nester:
1. Get a life insurance policy
According to LIMRA’s 2022 Insurance Barometer Study, the age group with the highest percentage of life insurance policyholders is people aged 65 and older. There are several reasons why. The chances of passing away increase as we get older, so policyholders can protect their partners in case that happens by getting a policy. It can also help with estate planning . The death benefit is tax-free, allowing you to pass more wealth to your heirs without worrying about taxes.
If you want to get a policy more quickly or skip the medical exam, there are types of life insurance with no medical exam available . For example, guaranteed issue life insurance is a small permanent life policy with level premiums. This type of policy offers a small death benefit that can help your loved ones cover end-of-life expenses like funeral and medical costs. Additionally, you can get the coverage you need in just a few days.
2. Reevaluate your estate plan
Once your children move out, they’re no longer necessarily your dependents. That calls for a reevaluation of your estate plan. Doing this will help ensure your assets are distributed in the right way when you pass away. For instance, now that your children are out in the world, you may want to adjust your will to distribute some of your assets to a favorite charitable cause.
Similarly, you should make sure all other estate planning documents are in place — not just your will. For instance, you may also want an irrevocable living trust, an advanced health directive, and a financial power of attorney.
3. Increase your retirement contributions
As an empty nester, you won’t have child-related expenses anymore. At the same time, you might be approaching retirement. This is the perfect time to increase your retirement contributions. Consider increasing your workplace contributions and opening an individual retirement account if you haven’t yet. You’ll be able to stash more for retirement and potentially save more on taxes.
4. Consider downsizing
With no more kids in the house, you can likely downsize your life without sacrificing your standard of living. For example, you won’t need as many bedrooms or as much space. You’re also probably closer to finishing your mortgage. So y ou could sell your house, pay off that mortgage, and move into a smaller home with little to no debt. Similarly, if you have two cars and are close to or in retirement, you could sell one if you don’t drive much.
Enter this new stage of life with your finances in order
Now that the kids are gone, your financial situation has changed. Fortunately, you’ll have some extra time to think about your finances and make a few moves to get ready for the future. Start by looking for a good life insurance policy and reviewing your estate plan while factoring your new policy in. Then, check on your retirement contributions and increase them if necessary. Consider downsizing as well. Making these financial moves will position you to enjoy this next phase of life with minimal money stress.