Having your children move out is an emotional time with many decisions to make — it’s also the perfect time to start taking retirement more seriously. If you’re recently an empty nester, experts recommend you quit investing in certain things to prioritize your future.
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“At this stage of life, retirement savings should be the top priority since college is temporary but retirement can last decades,” said David L. Blain, CFA and chief executive officer at BlueSky Wealth Advisors.
Below are the top things experts suggest you do once your kids leave the nest.
Redirect Funds
“As an insurance expert, I advise redirecting funds from overpaying life insurance premiums and children’s college expenses into tax-advantaged retirement accounts,” said Ben Klesinger, co-founder and CEO of Reliant Insurance Group and Helping Hand Financial.
According to Klesinger, permanent life insurance beyond when children are dependent is unnecessary and those premiums would serve empty nesters better in an IRA. He said the stock market’s 7% annual return after inflation provides income security if invested properly.
“Having saved clients six figures by optimizing their life insurance, I know how this strategy boosts retirement savings,” Klesinger said. “401(k)s, IRAs and Roth IRAs should be top funding priorities once children are independent.”
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Marty Burbank, estate planning attorney and owner of OCElderLaw, recommended the same. He agreed that too often, people continue overspending on their adult children or life insurance premiums out of habit. Instead, he suggested maximizing contributions to tax-advantaged accounts like 401(k)s and IRAs.
“I often advise clients approaching retirement to reassess how they’re allocating funds,” Burbank said. “While college is temporary, retirement can last 30 years. Prioritizing your financial security is key. Clients are often surprised to find they’re overpaying for life insurance or college when those needs have changed.”
Burbank feels permanent life insurance beyond when kids are dependent is unnecessary.
“Those premiums would serve you far better invested for retirement. I’ve helped clients redirect six figures into retirement accounts by optimizing life insurance.” Burbank said.
Downsize Your Home
According to Klesinger, downsizing homes also generates substantial retirement funds.
“Selling a larger house and investing proceeds generates higher returns than home equity alone,” Klesinger said. “My firm guides high-net-worth families to investments producing retirement income for potentially decades.”
Blain agrees. He said downsizing to a smaller residence and investing the proceeds can generate income during retirement.
“Empty-nesters have likely built up equity in their homes over the years,” Blain said. “The stock market has returned 7% annually after inflation, so home sale proceeds properly invested could provide income for retirement.”
Monetize Your Home
“When you’re an empty nester, one of your most important financial assets is your nest,” said Martin Orefice, CEO of Rent To Own Labs.
Your home provides considerable value when you sell it, letting you monetize it while still living in it, especially if you suddenly have extra space in bedrooms, garages or basements.
According to Orefice, preserving your home’s value is essential. Investing in regular maintenance and repairs is a good starting point, but you should also consider renovations, additions or landscaping features to keep your home current and desirable for when you decide to sell.
“Monetizing your home can be as low-effort as renting out some storage space or as involved as renting out parts of it on Airbnb or even taking on a full-time tenant.”
This can be a lot of work, Orefice added, and you’ll give up some privacy in the bargain, but you can get some serious income from an arrangement like this.
“Allowing you to pay off any lingering debt, keep up with property taxes and utility bills, or build your retirement savings.”
Work With A Qualified Financial Advisor
Every empty-nester’s situation is unique, so working with a qualified financial advisor to develop a customized retirement income plan is key.
“But as a general rule, reducing or eliminating expenses tied to earlier life stages and redirecting those funds to retirement savings is a sound strategy,” Blain said. “With retirement possibly lasting 25 years or more, saving enough to generate income over the long term should be the top financial goal during the empty nesting years.”
Burbank emphasized the same.
“Your adult children’s financial future is now their responsibility. Yours is ensuring you have income for an extended retirement.”
He recommended making that your priority by reassessing life insurance, college contributions and downsizing your home.
“Redirect those funds into retirement accounts for your own financial freedom.”
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This article originally appeared on GOBankingRates.com: 2 Things Empty Nesters Should Stop Investing In To Boost Retirement Savings
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