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5 Financial Moves to Make for Recent Empty Nesters

Empty nesters are in a similar boat as those just starting out – they have to figure out how to manage their money, which might be more plentiful if the nest is truly empty. Understanding how to manage your money when you are a new empty nester is crucial to a peaceful financial future during the time in your life when you are supposed to be enjoying your golden years.

1.  Maximize Retirement Contributions

Depending on how many years you have left in the workforce, when you become an empty nester is a great time to increase your retirement contributions. Even if you have been contributing 15 percent of your income on a regular basis towards your retirement, consider increasing the contribution at this point. Generally, when the kids move out, you have fewer expenses, which leave you with more money to save towards retirement. You can contribute to your company's 401(k) as well as your own IRA to help maximize the amount of money you will have when it is time to shut the door on your life as an employee.

2.  Consider Life Insurance Needs

Just because the kids are out of the house does not mean you do not need life insurance any longer. Consider your exact situation before canceling those expensive insurance premiums. Do you have enough for retirement? What would happen if you or your spouse became unable to work? Would you still be able to afford retirement? What if one of you was to pass away suddenly, where would that leave the other financially? These are the considerations to make when determining the amount and type of life insurance you need as an empty nester.

3.  Pare Down Debt

If you have a significant amount of debt, now is the best time to start paying it down. The less debt you have in retirement, the better off you will be in the long run. Start by writing down all of the debts you have and figuring out a plan to get it paid off. You can focus on one account at a time in order to see the most progress. Once one debt is paid off, work your way down on the next largest debt and keep going until the debts are a thing of the past, giving you more disposable income during your retirement years.

4.  Consider Downsizing

If your home is large because you raised a big family, it might seem really empty right about now. Is it feasible for you and your spouse or should you downsize? Think of the financial aspect, not just the mortgage, especially if your home is already paid for. Consider the taxes, utilities, and upkeep expenses for the home – can you afford them? Do you still want to pay for them or would you be just as happy in a smaller home? As you start to consider your options, start paring down your belongings and think about how you want to proceed. It could take years to actually downsize, so the sooner you start, the better.

5.  Think about Contributions to your Children

Just because you are an empty nester does not mean that your kids will not still need you. You might even find that you are spending more money on your child now than you were when he lived with you. Sit down with your child and your budget and figure out the maximum amount you are willing to provide so that you do not end up putting yourself into debt in order to support him.

The most important thing is to enjoy this time in your life. Being an empty nester can be heartbreaking and exciting at the same time. Think of it as a new adventure in your life and as long as you plan accordingly with your finances, you should be able to enjoy this time and your subsequent retirement.