Congratulations! The kids are grown and have moved out, and you’ve officially achieved empty-nester status. This is a great time to start planning for the next chapter of your life, whether that means downsizing, retirement, or both. However life may look, below are some essential tips to help empty nester navigate the downsizing journey with confidence.
Take a fresh look at your budget
Now that your kids have left the nest, your monthly budget likely looks very different (Has that grocery bill gone way down?). It’s a good time to take a fresh look at your budget and determine what your monthly expenses look like. Several may decrease, like utilities, and you may be able to cut some costs (like that streaming service that only the kids used).
But that doesn’t mean every expense will decrease. You may find that you spend more time going out to dinner, traveling, or taking up new hobbies. Or, your kids may still need financial assistance from time to time. Try to work these costs into your budget so that there are no surprises.
Pay off debt and keep saving
If you find that you have extra money each month, do your best to pay off debt first. There's some debate about how to go about this; some people start by paying off the balances that carry the highest interest rates. Others use the waterfall method and pay off smaller balances first, then put that money toward the next bill.
It’s also smart to start funneling as much money into savings, a 401(k), or IRA. The more you save now, the better; you’ll be glad you did when you retire.
Plan for retirement
Speaking of, retirement probably isn’t too far off. Hopefully, you’ve been contributing toward a 401(k) or IRA. Take a look at what percentage of your income goes toward retirement and consider increasing it, if you’re able. Individuals are permitted to contribute $6,500 annually toward an IRA; people age 50 and older may contribute an extra $1,000 each year.
Downsize your home
Whether or not to downsize your home depends on where you see life going. Do you anticipate having grandchildren and hosting big holiday celebrations? Or are you ready to scale things back and move into a condo? Consider what living situation is right for you, like access to medical care, weather, taxes and more.
Create an estate plan
Most people draw up estate plans when they start having kids, and most don’t look at them carefully afterward. This is a great time to review your plans and make changes depending on where life has taken you. You no longer need to worry about who will serve as guardian of your children, but you may want to think about how to split your assets among your children, who will serve as the executor of your estate and who will benefit from insurance policies.
Think about what’s next
If you’re not already retired, think about how long you’d like to continue working. Perhaps you and your partner would like to plan your retirement so that you stop working at the same time. Consider the financial ramifications; can you afford to retire? Will you need to take on a post-retirement, part-time job? How will you fill your time after you retire? Thinking about this will help you plan for the future.
Give yourself some grace
Becoming an empty nester is a big life change. Some people are ready for it, and some grieve their baby birds flying the coop. Be kind to yourself; spend more time on your hobbies, make new friends or plan a date night. Things are different, but different is good. And remember—you’ll always be a parent. Your kids will always need you.
However the planning for your next stage of life may look, WaterStone Bank is here just for you when it comes to your finances. Give us a call, schedule an appointment, or stop into one of our branch locations.
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