Empty Nesters and Budget Changes: 6 Ways Your Finances Should Shift

Erin OsterhausApril 21, 2023


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Seeing your last child leave the house can be an emotional event for parents. You’ve dedicated years’ worth of time, energy, and financial resources into raising them to be well-rounded adults that are ready to face the world on their own.

The change can be a shock, but it can also open up new opportunities—both personal and financial—that weren’t possible while raising a family. From groceries to utilities, your overall expenses may go down pretty substantially. With this change in expenses, you may also want to consider a few budget changes and reconsider your financial goals as you get ready for life after kids. Here we’ll go over six ways your finances should shift.

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1. Revisit Your Budget

One of the first things you should do when your last child leaves the house is sit down and review your household budget. The costs of maintaining a family versus a single person or couple can vary greatly, and there are likely areas where you can greatly reduce your expenditures.

This savings can come from a whole range of places, like lower grocery bills, fewer phone lines on your plan, spending less on high-speed internet, or even reducing the size of your weekly trash pickup. Plus, you’ll no longer need to budget for kids’ extra-curricular activities. If you’re nearing retirement, you might even be thinking about downsizing your home to lower monthly utility bills and tax payments.

Once you’ve determined your new monthly budget, you can begin to start reallocating any newly freed up cash-flow into financial goals that will help you in your next phase of life.

2. Top Up Your Emergency Fund

If you find that you have extra cash in the budget every month, the next priority is to ensure you have at least three to six months’ worth of expenses saved in an emergency fund. You never know when your car might break down, your air conditioning might go out, or a medical emergency might occur. And while you don’t have kids at home anymore, you’re still a parent and may need to help your kids out of a difficult situation.

3. Pay Off Debt

With a new budget in hand and a fully funded emergency fund, the next shift you should make in your financial life as an empty nester is to reevaluate your current debts. If you find that you have a bit more room in your budget now that your household is smaller, it’s a good idea to start paying off high interest debt like credit cards, car loans, and private student loans. This is a great step forward to more financial flexibility and stability as you head into retirement.

In terms of paying off your mortgage: this is a decision that everyone needs to approach differently. If you have a great interest rate—as in, less than 3%–paying off this debt probably doesn’t need to be a priority. But if you’re close to retirement, have no other debts, and have your retirement accounts fully funded, paying off the house might bring you even more financial stability.

4. Revamp Your Retirement Savings

Once you have an emergency fund in place and a solid debt repayment plan, now it’s time to start thinking about revisiting how much you allocate toward your retirement savings every month. You’re likely approaching retirement age, and while Social Security will likely be one pillar in your personal retirement plan, it’s important to think about how you’ll make up for the gap in your budget that Social Security won’t cover.

If you find you’re able to increase your retirement savings once your kids leave the house, many experts recommend the following strategy:

  • Meet your company 401(k) match. First, if you have a 401(k), make sure to contribute up to any match that is provided by your employer—it’s a 100 percent return on investment.
  • Contribute to your IRA. Next, max out your individual retirement account (IRA) if possible. The IRS increased annual contribution limits for IRAs in 2023 to $6,500. Those who are 50 years or older can contribute an additional $1,000 per year for a total of $7,500.
  • Turbo charge your 401(k). If you’re able to meet your 401(k) match and max out your IRA contribution, the next step in your personal retirement planning is to put as much toward your 401(k) as possible. You can contribute up to $22,500 per year into your 401(k), and those 50 or older can contribute an extra $7,500 for a potential total of $30,000 per year.

5. Plan for Your Children’s Future

Although your children might not live with you anymore, you may still want to ensure they’re well taken care of, both now and even after you’re gone. If you drew up an estate plan when your children were young, it’s a good time to review that plan now as your life is probably vastly different. While these may be difficult things to talk about, they are key to protecting your estate and providing financial support to your children (and possibly grandchildren). Things to think about include:

  • How to divide your assets among your children
  • Updating your beneficiaries on all your financial accounts
  • Appointing one of your children as the executor for your will
  • Giving one of your children powers of attorney in the event that you’re incapacitated

6. Enjoy Your Newfound Freedom

When you become an empty nester your financial obligations and goals will change, but so will your whole lifestyle. After completing your parental duties, you can now take some time to focus on you and your personal interests.

After you’ve taken all the steps above and your finances are fully in order, it’s time to start thinking about what you want to do with all your extra time, and potentially shift some funds toward financial goals that bring you joy, like travel, further education, hobbies, or classes. Your budget is going to look a little different—and that can be a good thing!

*Non-deposit investment products and services are offered through CUSO Financial Services, L.P. (“CFS”), a registered broker-dealer Member FINRA/SIPC and SEC Registered Investment Advisor. Products offered through CFS: are not NCUA/NCUSIF or otherwise federally insured, are not guarantees or obligations of the credit union, and may involve investment risk including possible loss of principal. Investment Representatives are registered through CFS. The Credit Union has contracted with CFS to make non-deposit investment products and services available to credit union members.

Prepared by Broadridge Investor Communication Solutions, Inc. Copyright 2018.

Talk to a CFS* Financial Advisor

Want to take your retirement plans to the next level? Schedule a Amplify Wealth Management appointment with our colleagues at CUSO Financial Services (CFS).

Erin Osterhaus

Erin is a personal finance writer based in Austin, Texas. Her work has been featured on TechRepublic, Yahoo Small Business, and Entrepreneur.com. She’s been passionate about helping others manage their money since she successfully paid off $60,000 in student loans in four years. When she’s not writing, Erin loves reading, studying languages, and spending time with her family.