Empty Nesters

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One commonality that can be found in parents across virtually all species in the animal kingdom is the will to sacrifice life and limb to protect and provide for their offspring. The Adelie penguin travels thousands of miles only to spend months more standing in the bitter cold protecting her eggs. In another more extreme example, scientists observed a sea octopus guard her eggs for close to five years with no signs of having eaten during that time. 1 In contrast, the sacrifices we humans make on behalf of our own children seems rather mundane. Nonetheless, raising a child is a physically and mentally taxing, time consuming and, as it turns out, extremely expensive endeavor.

Accounting for inflation, parents of a child born in 2015 may expect to spend roughly $284,570 on food, shelter, and other necessities for their child before they reach the age of 18.2 Significantly, this figure does not include the price of a college education; tack on college tuition, room and board, a meal plan, and textbooks, and the cost of raising a child jumps to nearly a half a million dollars.3

It should come as no surprise that people spend about 51% more of their income as parents than they did before they had children4, despite the fact that their earning power also likely increased over that time. While lifestyle adjustments may help explain the increase in spending, they may not be sufficient on their own. As a result, some parents may find their retirement savings (and the plans they had for themselves in retirement) in jeopardy.

One way to “catch-up” with your retirement preparations is to maximize the contributions to your retirement account each pay period, taking into consideration the limits on how much you can contribute to retirement accounts each year. For the 2018 tax year, 401(k) participants are eligible to contribute up to $18,500 to their plans, with an extra catch-up contribution of $6,000 for participants age 50 and older.5 For those saving through an IRA, contribution limits are $5,500 for 2018 with an extra catch-up contribution of $1,000 for those age 50 and older.6 If possible, parents of adult children should make the most of this opportunity to ramp up their retirement savings.

Many parents may find that the extra money they have allocated for their kids is no longer a necessity during the empty nest stage. Although it may be very tempting to use the extra money on impulsive spending, try to allocate your excess money into saving for the future. The transition into the empty nest phase can be an extremely important time for building your retirement savings. For instance, if you put the money that was previously being used to pay for your child’s college tuition towards savings, you may find yourself headed down a successful path to retirement.

While setting aside the money that was previously being spent on kids, look for other places to save as well. Start with where you may be able to cut costs, as well as exploring different techniques to minimize your tax burden. Downsizing your home is one major area where you may be able to reduce expenses significantly, thereby providing you with more cash that can be placed into savings for retirement. Another possibility is to consider renting so you don’t have the burden of property tax and maintenance fees.

Lastly, evaluate if it makes sense for you to pay off any outstanding debt. According to a recent study, 56% of Americans still had outstanding debt when they retired.7 While debt such as a mortgage may offer some tax advantages in the form of the deductibility of the interest, payments on other types of loans may detract from what you could otherwise be saving, without the tax benefits. Therefore, prioritizing paying off your debt may be a worthwhile goal.

It won’t take long to adjust to having more money to spend after the kids leave home. But don’t wait too long to reset your financial priorities. Consider allocating at least some of your empty nest surplus toward your retirement savings.

A financial professional can be an invaluable resource throughout this process. Ask me, “How am I progressing towards my retirement saving goals?” and “Do I need to do anything differently in order to reach my goals?” Together, we can create a plan that balances your current needs and plans with your long-term savings goals.


1 “The Making of The Frozen Planet” , David Attenborough
2 https://www.usda.gov/media/blog/2017/01/13/cost-raising-child
3 https://www.usda.gov/media/blog/2017/01/13/cost-raising-child
4 http://time.com/money/3537582/empty-nest-retirement-savings/
5 www.irs.gov
6 www.irs.gov
7 https://www.huffingtonpost.com/irvin-g-schorsch/empty-nesters-gone-wild_b_1465675.html


Apella Capital, LLC, is an investment advisory firm registered with the Securities and Exchange Commission. The firm only transacts business in states where it is properly registered, or excluded or exempted from registration requirements. All data is from sources believed to be reliable, but cannot be guaranteed or warranted. No current or prospective client should assume that future performance of any specific investment, investment strategy, product, or non-investment related content made reference to directly or indirectly in this article will be profitable. As with any investment strategy, there is a possibility of profitability as well as loss. Please note that you should not assume that any discussion or information contained in this article serves as the receipt of, or as a substitute for, personalized investment advice from Apella Capital or your advisor. Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions.

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