Couple driving in a convertible with passenger hands in the air

Tips for the Empty Nester Investor

As your kids become independent, how can you use your newfound financial freedom?

While it may feel like the end of an era, becoming an empty nester can mean exciting changes await. Take this time of transition to review your finances with your Baird Financial Advisor and explore the following strategies.

Revisit Your Goals

Now that your kids have flown the coop, it’s a key time to reflect on your own goals. You may want to consider when you want to retire, what you want to accomplish before retirement and whether your kids or grandkids will need ongoing support.

Create a New Budget

To start, try tracking your spending habits for a few months by using tools like Baird Online’s 360 Wealth budgeting feature. You might find you’re now spending less on meals, or that you’re still paying for other expenses like streaming services that you no longer use. If you find you have excess cash, pay off debt or beef up retirement savings – and if you’re 50 or older, remember you can contribute an extra $7,500 to your 401(k) and an extra $1,000 to your IRA annually as a catch-up contribution.

Evaluate Your Housing Situation

If your kids are settling into homes of their own, it might be time to downsize. This could decrease utilities and insurance expenses, require less upkeep and even give you a chance to live in a place that better fits your new lifestyle. Just keep in mind that moving to a new home could mean taking on a mortgage with a higher interest rate, alongside other downsizing considerations.

Consider Your Liquidity Needs

In retirement, banks can be reluctant to give out loans due to a lack of consistent income. By taking out a securities-backed line of credit (offered for qualifying clients at Baird) or a home equity line of credit before you reach retirement, you can secure another source of emergency cash post-retirement.

Review Your Insurance

You might find your insurance needs have changed over the years. For example, life insurance policies you took out to cover a mortgage or the expenses of raising children may no longer be necessary, while long-term care insurance is just now becoming a major consideration. Your Baird Financial Advisor can conduct an insurance plan review that can determine the coverage that’s right for you.

Plan for Healthcare

If you’re eligible, maxing out your contributions to a Health Savings Account can reap many benefits. Plus, if you’re 55 or older, you can contribute an extra $1,000 per year to them as a catch-up contribution. And as you plan for healthcare, don’t forget about the kids – they can stay on your health insurance until age 26, which may be more cost-effective for them than going on their own policy.

Revisit Your Estate Plan

Generally, revisiting your estate plan every three to five years (or at every milestone life event) is a good rule of thumb. And now that you have adult children, you might take this time to consider them for power of attorney, beneficiary or executor roles in your estate.

Help Your Kids Gain Financial Independence

You may consider giving some extra support to your kids on their journey to financial independence. In a period of elevated inflation and housing prices, jumping into adulthood isn’t an easy feat. Maybe encourage them to open their own credit card and take on an auto insurance policy. Then, you can help them consider the impact of larger expenses like a down payment on a house or car.

Our downloadable checklist provides a step-by-step guide to navigating this change. When you’re ready, fill it out and share it with your Baird Financial Advisor who can help you plan for this next chapter.

Three slashes