Empty Nesters Need to Protect Their Nest Eggs
School will be starting up again soon. Perhaps some of you are sending your kindergartner off to school for the very first time with a shiny new backpack and lunch box in hand. Or perhaps some of you are sending your youngest child off for their last year of college, the last to leave the family nest. A new chapter of life has just begun for you. This may feel like a strange and uncomfortable period of loss and change, but it is also a period of gain and financial awareness. You’ve been diligently squirreling away money for college tuition so now what do you do? It’s likely time to revisit your long term planning as a result of this new phase of life.
With the costs of college tuition soon behind you, you may finally be able to focus more fully and save more consciously for your retirement. This new phase of life allows some fiscal freedom to recalibrate and push these funds into your retirement savings. This can be done in the form of increased retirement fund contributions or active saving in your trust and investment accounts. After all, it’s likely that for the last 18 years or more you’ve concentrated on funding your children’s education. Now your retirement can move to the front burner. In fact, using this new empty nest phase to fill the gap in your retirement savings is key. There’s no time like the present to consciously review, update and test your long term plan in this post-child-rearing catch up period to retirement.
Directing money that previously has gone into college funds is not the only way to catch up to your retirement plan. Spending can be cut during this phase of life. You are now no longer feeding an army and your energy and utility costs are also likely to be less. Perhaps there are premium cable TV channels that your child watched, or memberships and subscriptions that can be cancelled. A review of your discretionary spending will also allow you to identify ways to dramatically reduce your spend rate and increase your savings rate.
Your insurance coverage is likely due for a review. Many people have enough life insurance coverage to ensure that the cost to educate their children is covered. With your last child soon to graduate, this may not be a necessity and perhaps you can adjust your life insurance to a lower death benefit or fully paid policy.
Similarly, it’d be a good time to review your other policies to include home, auto and umbrella policies. An umbrella policy for parents of college students is an important wealth preservation tool, given the higher than normal liability risk. That risk doesn’t leave you while your son or daughter is away at school.
Of course, while you plan for the next stage of your life, the door never really closes. Your children and aging parents may come knocking. It’s very important to consider a contingency plan should family members need your help. As written in our Sandwich Generation blog, the financial burden of caring for both parents and children can be significant.
You’ll be busy in your empty nest years. Part of empty nesting means tapping your ambitions, hobbies and reveling in “you” time, whether that’s scaling back on your career or focusing on a new one, traveling to exciting destinations or trying new adventures. Setting aside funds is an important part of accomplishing the things you want to do.
Getting your financial picture into focus with appropriate and realistic plans should ensure that you continue on track to achieve your retirement goals. We recommend you be in touch with these plans regularly.
This information has been developed internally and/or obtained from sources that Sand Hill Global Advisors, LLC (“SHGA”), believes to be reliable; however, SHGA does not guarantee the accuracy, adequacy or completeness of such information nor do we guarantee the appropriateness of any investment approach or security referred to for any particular investor. This material is provided for informational purposes only and is not advice or a recommendation for the purchase or sale of any security. This information reflects subjective judgments and assumptions, and unexpected events may occur. Therefore, there can be no assurance that developments will transpire as forecasted. This material reflects the opinion of SHGA on the date made and is subject to change at any time without notice. SHGA has no obligation to update this material. We do not suggest that any strategy described herein is applicable to every client of or portfolio managed by SHGA. In preparing this material, SHGA has not taken into account the investment objectives, financial situation or particular needs of any particular person. Before making an investment decision, you should consider, with or without the assistance of a professional advisor, whether the information provided in this material is appropriate in light of your particular investment needs, objectives and financial circumstances. Transactions in securities give rise to substantial risk and are not suitable for all investors. No part of this material may be (i) copied, photocopied, or duplicated in any form, by any means, or (ii) redistributed without the prior written consent of SHGA.