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Personal finance for empty nesters
How to meet your commitments and be ready for retirement?
One of the key
components of personal finance and retirement planning is
that as we get older or if there is any other material
event (e.g.
marriage,
divorce, birth of a child, change/loss of job,
promotion, major asset sale, etc.) happening, we should
review our situation and act accordingly. Let us
discuss the issues that are of importance to emptynesters.
According to LendingTree President Anthony Hsieh, "Empty
nesters’ key financial issues may include any, or all, of
the following:
paying off college loans for their children;
supporting their aging parents; ensuring they are
prepared for retirement. It’s a critical time to
review your
financial situation and make sure you have your ducks
in a row for the coming years." Below are more tips:
Keep
liquid savings on hand when helping children. Empty
nesters may find they would like to give their children
small cash gifts such as down payments for
cars or other immediate needs. Others may want to help
in big ways such as paying for weddings,
first homes or college loans. In either case, it is a
good idea to take a percentage of the money you used to
spend on them and set it aside for a future event when you
would like to help financially. (Related:
How to secure your nest egg) |
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Choose the
right repayment plan when paying off college loans.
Parents can choose to take a PLUS loan, which is a
federally sponsored loan just for parents and has similar
options as student loans. The key difference between a
PLUS loan and a student loan is that you begin repaying
PLUS loans as soon as you borrow the money. There are a
number of options with this loan, including standard,
graduated, income-sensitive, extended and consolidated. If
you can afford it, a faster repayment schedule with the
standard option will
get you out of debt sooner and result in lower
interest payments. (Related:
Debt consolidation)
Continue
to
teach your children smart financial habits. As parents
become empty nesters, many experience social pressures to
ensure their children exceed the standard of living of
past generations. These feelings coupled with high
consumption pressures can create a false sense of security
for children as the parents continue to support them
financially. Ensure you create a structure to help your
children succeed on their own by helping them manage their
budgets independently and take ownership of their spending
habits. |
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Take
responsibility of
financial planning if you are supporting your
 parents.
Some empty nesters find they are contributing
financially to their grown children as well as
their parents. These empty nesters are often
referred to as the "sandwich generation." It is
critical that you manage both sides effectively so
you do not become overextended. Speak with your
parents about their specific
financial needs, so you can help them in the
best way possible.
Emergency savings are the most critical at
this point in life when others are depending on
you. |
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Consider
scaling down your home. When children move out and finally
become independent, the result can be a large empty home.
Aside from being exhausting to maintain, if it is highly
valuable, the property taxes may be an unnecessary burden
on your budget. Additionally, by moving into a smaller
home, it can free up equity to be used elsewhere.
(Related:
Should I refinance?) |
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