According to the U.S. Bureau of Labor Statistics, most kids fly the coop by 27. Those who leave sooner often boomerang back, and college grads tend to leave a bit earlier. But it’s not just about the kids. This shift impacts family dynamics and, especially, parental finances.
Let's dive into what to consider and how to tackle it.
If your kids just moved out, it's almost a given that you're still footing some bills—phones, groceries, outings, even rent. While this is typical and usually harmless, the best way to encourage financial independence is to plan it together, ensuring it's smooth and orderly. However, make sure this support doesn’t strain your finances or rack up debt. If that's the case, have an open chat about it and figure out a plan together.
Once you're no longer using most of your paycheck for the kids but are still giving them a helping hand, it's the perfect opportunity to focus on saving for retirement. Consider increasing contributions to your 401(k)s and IRAs. If both you and your partner put $2000 into these plans, your savings can grow significantly. Additionally, think about setting aside extra funds in a taxable brokerage account. While these accounts lack the tax advantages of retirement plans, they avoid the IRS's mandatory withdrawal requirements starting at age 73. This flexibility allows your investments to grow over your lifetime and potentially benefit your heirs in the future.
We don't mean to scare you, but it's worth noting that According to Genworth Financial's Cost of Care Survey for 2021, the current median annual cost for assisted living is $54,000, an in-home health aide is $61,776, and a private room in a nursing home is $108,405. And given that roughly 60% of adults will need long-term care at some point, it's crucial to plan ahead and explore solutions. One intriguing option, for instance, is long-term care insurance. While annual premiums can be steep—averaging between $1,175 and $3,800 for a 60-year-old man and between $1,900 and $6,600 for a 60-year-old woman—they could still be much less than what you or your family might otherwise pay out of pocket for professional long-term care.
Maybe you’ve already thought about it, but with the kids out of the house, this might be the perfect chance to find a space that better suits your current needs. Nostalgia can make us cling to the “forever home,” but if finances are tight, the smartest move is to let go of the past. A new, right-sized home can help you save, pay off debts, and funnel more into your retirement plan—or all of the above.
Downsizing can apply to more than just your home—it can work for your wheels too! Maybe it’s time to swap out the old family car for something smaller and newer, perfectly sized for your current needs. Say goodbye to the minivan and hello to a sleek new ride!
https://www.bls.gov/opub/ted/2015/90-percent-of-young-adults-moved-away-from-home-by-age-27.htm
https://www.genworth.com/aging-and-you/finances/cost-of-care
https://www.aaltci.org/long-term-care-insurance/learning-center/ltcfacts-2022.php#2022costs