If your last child has moved out of your house and your finances aren’t exactly shipshape, you’re far from alone.
It’s not surprising that baby boomers often find their savings and retirement accounts less than ideal once they’ve mostly taken care of the expenses that come with parenting. One GoBankingRates study recently determined 40 percent of Americans 55 and older have less that $50,000 in retirement savings and one-third have less than $10,000 saved, which are insufficient funds for retirement.
“We’ve set up this environment that expects that even though raising kids is so expensive, parents should somehow magically have enough dollars to raise the kids, cover all the expense associated with their kids, save money for their college educations — and have a big retirement nest egg built up by the time the kids are graduating from college,” notes Michael Kitces on Morningstar.com. “In reality, the statistics show us there just aren’t enough dollars to go around for most people.”
That may be true, but it doesn’t mean you shouldn’t try to optimize your financial situation with an eye toward your future once you become an empty nester. Consider the following tips in that regard.
- Forecast future living expenses. Now that your household has dwindled, many of your regular expenses such as food, clothing, utilities and medical costs should dwindle. You may even wish to downsize your home. Do the math to determine how much to re-budget for everyday living expenses.
- Ponder postponed parenting costs. Your kids may not be under your roof, but have you committed to paying for further education, wedding or housing expenses? What about gifts or financial support for grandchildren? Make sure you factor those into your budget moving forward.
- Pay down debt. Now is the time to finally dispense with those loans you just couldn’t get to before. You may need to tighten the purse strings to make that happen, but it will pay off when you’re free of the payments and interest that would otherwise just sop up your extra spending money in the future. And living off Social Security while trying to pay off mortgages, credit cards or auto loans can be tricky at best.
- Establish a solid retirement plan. Identify areas of saving that will allow you to sock away money for the future; examples may include a lesser internet service plan, mobile phone account or TV channel service. Then have that savings amount automatically deducted from your paychecks and straight into a tax-favorable account like a 401(k) or IRA. "Give to yourself that which you were giving your children," recommends Mary Alice Hughes on Money.USNews.com.
- Resist wild investments. You may be tempted to take investment risks to try to accrue more money for retirement, but that’s seldom a good idea. You could lose the entire amount.
Finally, be proud of what you’ve accomplished so far. Your financial plans for the future may not include the excitement and glamour you once envisioned but having an achievable plan in place should offer you peace of mind. Balance any sense of disappointment with pride in raising your kids to the best of your ability and contributing to future generations.