Thriving In the Empty Nest

Updated : Oct 26, 2019 in Articles

Thriving In the Empty Nest

Kristin: Hi, everyone. Welcome to our Google
Hangout “Thriving in an Empty Nest.” I’m Kristin Arnold, social content manager for Ally Bank. Janet: And I’m Janet Reusch, social media
community manager for Kristin: Before we introduce our panelist,
I just want to take a moment to let everyone know that our discussion today is not meant
to provide you with financial or investment advice, but rather you should speak to your
financial planner with any specific questions that you might have. All right, let’s kick
things off, joining us today to share their personal views of Empty Nest Financial Planning
is Greg McBride, senior vice president and chief financial analyst for
Also joining us is Jack Tatar, retirement expert and author, and also Elizabeth Fishel,
she is co-author of the book “Getting to Thirty,” a parent’s guide to the twenty-something years. Janet: So, if you’ve reached or will soon
be reaching the milestone of becoming an empty nester you may be looking forward to the next
phase of your life where you can really focus on your interests and enjoy your time. Kristin: Right, and it’s also the perfect
time to focus on the next stage of your financial planning. Taking stock of your overall financial
health will give you a broader picture of where you may need to make adjustments in
order to reach your goals and also be prepared for some of life’s unexpected happenings and
unknowns so let’s jump right into our first question, and this is pointed for Jack. Jack,
in an empty nest, it doesn’t actually happen overnight, so what wise financial steps can
impending empty nesters start performing now to make for a more comfortable transition? Jack: One of the things that I think people
need to understand is that an empty nest is something that you can actually plan for.
And when I say plan for, not just financially but also attitude. So, I think it requires
that the people, husband and wife, spend a little bit of time before the empty nest actually
happens to rediscover themselves and spend a little bit of time understanding what their
interests are, making sure they’re in sync because they’re going to be spending a lot
of time together after that. Now financially, I think that there is a real consideration
for maintaining contingencies and understanding that things will probably not go as planned
and to take a good look at your extended family as well as your children and some contingencies
and to build some financial plans in there as well. If the children come back, if there’s
gonna be healthcare costs, those types of things. So it requires a real holistic view
of not only the financial aspects but also the attitude and how you are going to be involved
with each other going forward. Kristin: Elizabeth, do you want to take a
shot at that question too? Elizabeth: Well, I agree with Jack. I think
that it’s very important to look at both the emotional side and the financial side of becoming
empty nesters and one specific that I would add when Jack talked about contingencies,
is that sometimes it makes sense to plan for five years rather than four years of financial
support for your 18-29 year old because one of the premises of our book, “Getting to 30”
is that the road to 30 is a lot longer and can be rockier than it used to be. And milestones
are reached a lot later and so that four-year college program might take five or even six
years and it might not be followed by a full time job for your twenty-something. So, thinking
about having a cushion of an extra year beyond the four is a wise, albeit somewhat disappointing
thing and it can be a good thing to plan for in advance. Janet: So, Elizabeth, just to stay on the
speed a little bit, what are some of the financial mistakes that people tend to make when becoming
empty nesters and how can those mistakes be avoided? Elizabeth: I think, to beware that feeling,
‘oh, free at last, free at last, now we the couple or I the single parent can do absolutely
anything I or we feel like.’ There are definitely ongoing obligations. Of course, there is the
expense of college, which has gotten ever higher over the years. There’s the financial
support for kids both in college and out of college and then also, which I know we’ll
talk about later when kids boomerang home. So, it’s a better idea to look at the whole
decade — the 18 to say 29 decade — because many kids are not reaching financial independence
until close to thirty. I think in our survey, even between ages 25 and 29, parents were
still giving help to about 20-30% of twenty-somethings. So it’s not quite trip to Bali, don’t look
back. But there’s still some obligations. Janet: And Greg, what do you think? What do
you see, mistakes people making when they become empty nesters? Greg: I mean, similar to what Elizabeth was
just saying, I think a big mistake is that you view this extra room you have in the monthly
budget as a big windfall that gets spent, which is a problem if you have other financial
fish to fry. If you’re behind on your retirement savings, if you’re carrying high cost debt,
if you’re under saved for emergencies, those contingencies that Jack had talked about,
it’s an opportunity to really make hay while the sun shines on those financial priorities
before you really start to have that live-it-up lifestyle. Jack: And also, If I can just build upon something
that Greg talked about in terms of financial situations, is be very cognizant when the
children are in college of where you take the money and you use the money from. A lot
of people will say, “well, I need to handle, pay this and I am going to pay it out of retirement
or I am going to take it from my savings.” It’s very important that you plan ahead for
college with 529’s and all those type of tax advantage accounts and not take from your
retirement. Because then you will incur some real problems later on down the road. So just
have a plan and stick to that plan when the children are in college. Elizabeth: If I could just add and tell me
your thoughts about this, we say try not to take more than 5% from your investments or
savings to help grown-up kids, especially after college. Would you agree with that percentage? Jack: Well, I think any time you have a number
like that, that’s a good thing to shoot for. It’s always good to shoot for things like
that. I mean, I know people that plan for college and they’ll put investments into 529,
UGMA and their own accounts in their own name and get the tax advantage benefits there but
also provide some ability for the, should the student get a scholarship or should something
work out with the students working, that they can then use the funds for their own retirement. Elizabeth: Absolutely. Jack: So, there’s a lot of planning that needs
to go on there. As long as you have a good number, I think that’s advantageous. Kristin: And finding that balance is what
we all strive for no matter what stage we are in our life. So how can empty nesters
find that balance if they just happen to have some excess finances to fulfil their life
list items that they want to do, the things that they have been waiting to do later in
life, now that the kids are gone without being irresponsible? I guess, Jack, you can take
that one. Jack: Oh, okay. Well, being the most irresponsible
one here, I’ll take that. I think the reality, when you take a look at now we are an empty
nester, you don’t want to get crazy. You still want to stick to a plan. Because there are
going to be contingencies. There are going to be healthcare issues that are going to
pop up. There are going to be things pertaining to your child. They might have five children.
They may not have any children. There’s all these things that are going to come up. I
do feel that it is important that when a husband and wife or a couple reach the empty nest
that they do go and celebrate. I think it’s a good time to go and celebrate. I’m not a
big fan of these people that say look, “I’m going to spend every dime and not leave anything
for the children.” If I can see that far into the future, terrific, but I think most people
can’t. So I think you’ve got to continue to be responsible with your money. But I do think
you want to enjoy your life but I also think that you can’t break the planning and the
mold of putting money away and budgeting and all those things; you can’t break that. You
have to still stay disciplined but have a little bit of fun with it but don’t go running
to Vegas, don’t do anything else. There is still a need to stay disciplined and structured
in terms of your financial planning and your financial spending. Kristin: Greg, what do you think? Greg: Well, Kristin, you said the keyword,
balance. And that’s really the key, all work and no play is no fun, but it’s not healthy
either so you really have to maintain that balance, both from the financial standpoint
and also a lifestyle standpoint. Janet: So Jack, you brought up healthcare,
which brings us to our next point, future taxes and healthcare costs are going to be
major factors in empty nester retirement planning. So Greg, why are tax advantaged investments
such an important part of retirement planning? Greg: well, Janet, tax advantaged accounts,
they really give you the most bang for your investment buck. I mean, it’s like having
the easy pass to go zipping through the tool booth rather than having to stop and fish
out spare change. That tax advantage really turbo charges your returns over a long period
of time. When you look at something like a Roth IRA, this gives you tremendous flexibility
about when or when you don’t want to take distributions. You don’t have to start taking
money out at age seventy and a half if you don’t need it. So it’s a great way to have
a pot of money that you can defer until you’re in your 80s and 90s but at the same token,
it’s also a pot of money that you could tap into early in your retirement years, say when
you are in yours 60s and you need a little bit of additional income, but you don’t want
to push yourself into that next highest tax bracket. So I think there’s some real advantages
to that. I just want to stress that be sure to fully utilize your tax advantage retirement
saving opportunities before you start saving for retirement in a taxable account. Jack: We’ve grown up with the philosophy that
you want to maximize your income in retirement. Because when you’re retired, you’ll be at
a lower tax bracket. I’ve got to tell you that you want to have as much money as possible
but the tax bracket being lower is not going to be the case. So, what we’re seeing now
is we’re seeing a lot of advisers and planners say “let’s find ways to make more tax advantaged
income.” And they’re moving people over to Roth and doing a lot of evaluations that basically
show that take the hit now, you’ll benefit in the future. HSA’s are another way to use
some money down the road that’s tax-free. So this need to take a look at creating income
down the road for you that’s tax-free is a new thing but it’s something that people really
need to take a look at. If you’re still following that philosophy of maximizing income and getting
as much as possible in retirement, you really want to take a look at this because the tax
bite can really impact some of your dreams and some of your financial thoughts down the
road. Kristin: And speaking of that, Fidelity estimates
that a 65-year-old couple retiring this year will need an average of $220,000 to cover
medical expenses in retirement. And that estimate does not include any cost associated with
nursing home care. So for empty nesters, say 10 to 15 years away from retirement, how can
they factor future healthcare costs into their retirement saving strategy now? Greg: Well, it really lends urgency to maximizing
your savings, particularly those tax advantaged options we were talking about a minute ago,
like the 401Ks and the IRAs. But it’s also really important to allocate your investments
for the long haul. Even once you retire, don’t move entirely out of stocks of a retirement
horizon that could stretch 25 years, 30 years, maybe even more. You’re gonna need some growth.
You’re gonna need some investments that protect your buying power. So, you can’t afford to
hunker down in safe haven investments. Kristin: Jack, you wanna take a shot at that
as well? Jack: Well, I think it’s a very, very important
thing that a lot of people did not recognize. I remember about five years ago, I was on
a television show in Connecticut, and I mentioned this number to the person. It was a money
show. She almost fell off her chair. She could not understand or believe that it was going
to cost this much money. So many of us go into retirement thinking Medicare is going
to handle everything and it’s not. This $220,000 number is something that Fidelity has been
playing with. And the reality is you have to have a plan for getting money to handle
your healthcare costs in retirement. It’s not just about your income, you’re gonna have
to need money for healthcare cost and these are probably going to be even more of an issue
now with the changes in healthcare laws. And long-term care, all of those types of things.
If you’re a younger person, you can take a look at long-term care, take a look at those
options, a lot of them are drying up. Some people are using annuities with writers and
those types of things. The point is that there’s a lot of options out there that you need to
take a look at. But I’m not sure that they’ve even got that figured out, a lot of these
products out there. So it is very important for you to plan on having healthcare costs
down the road. Once again, that’s another contingency situation. Medicare, Medicaid,
those types of things are probably not going to pay for those things in the way that you
thought. Kristin: Jack, you mentioned long-term care
insurance, and I want to talk a little bit more about that. Because it’s something that
you may or may not ever need to have a lot of the plans out there now, you want to get
them early before you get sick, and a lot of the plans are becoming hybrid plans where
they offer not only long-term care but they also offer life insurance. So when you plan
for that contingency later in life and you are talking long-term care, what are some
of the considerations for that type of insurance? Jack: Well, I think that long-term care is
definitely a consideration. And people will say that you’ve got to get it younger. You
can’t wait until you’re older when you really need it. You will not be able to get these
plans. There are annuities out there that have hybrid types of things where you put
a writer into place to handle these types of things. But many people have to get past
the cost of long-term care. So many people say “I don’t want to pay for long-term care.
I may not need it and it’s a costly expense.” Well, you pay for auto insurance. You probably
don’t use auto insurance. You may never use long-term care, but I will tell you that the
amount of money that it will cost you for long-term care will wipe out your estate that
you were hoping to pass on to your children. So you’ve got to take all these things into
consideration. Long-term care is very personal and customized solution for people out thee.
They’ve got to take a look at the options out there; insurance plans, hybrid plans,
educate yourself on this. Kristin: Another contingency that many people
may or may not plan for, when I say many people I mean empty nesters, is some Boomerang kids
might be coming back into the nest and of course parents instinctively want to help
the kids but they might do so at the detriment of putting money towards their retirement.
So this question is directly for Elizabeth. What are some of the strategies that both
parents and Boomerang kids can apply to their situation? Elizabeth: To make things more harmonious,
when boomeranging, which has become almost inevitable, I think 50% of 18 to 24 year olds
are moving back with their parents. And so the stigma is gone. We’re becoming a little
bit more like many countries around the world; Europe, Asia, South America where it’s completely
natural and expected for kids to either stay home or come back after their education. And
some don’t move out until they get married. That pattern hasn’t really taken hold here
and it probably won’t. But the most important thing is to have advanced discussion and advanced
planning and that means, even though it’s a little delicate but before your kid has
moved back from college to have a talk and tell them exactly what you can offer. See
if there’s going to be an endpoint. Some parents will say, “I’d love to welcome you back for
six months or a year but after that, you’ve got to fly on your own.” Also, what are your
expectations financially? Are you going to ask them to pay some rent or chip in or chip
into other expenses like buying groceries. And then in kind contributions, like cooking
dinner on a certain schedule or once in a while or doing chores or taking the pet to
the vet, whatever it might be, that isn’t necessarily financial but will definitely
ease things for a parent with a boomerang kid. And then the other thing, from the young
person’s point of view, do they have, what we call, a plan with a capital ‘P.’ It’s a
lot easier to support a returning grown up kid if you can see that they’re taking some
good steps toward a profession, toward solid employment, toward moving out and finding
a place of their own. If they have an internship, maybe it’s unpaid or maybe it’s badly paid
but is it in a field that might go in a positive direction? Maybe they need to do part-time
work but they can still explore some avenues in a field that could really build into a
career. If, as a parent, you see that your kids has this plan, then I think you’re a
lot more comfortable giving them the support knowing that there’s going to be an endpoint. Kristin: I’d like to hear Greg’s response
on that, because sometimes that support means money. And that money could be going towards
retirement. So, Greg, how do you balance that out without sacrificing your future for retirement? Greg: Well, I think Elizabeth hit on some
of these points where things like establishing rent, specifying the maximum amount of time
you are willing to help, or the amount of financial assistance you are willing to provide.
Because at the end of the day, you cannot sacrifice the ability to save for your own
retirement. Elizabeth: And I’ll just add, speaking of
building your own retirement. When your twenty-something, does get a descent job, even though it seems
miles away, encourage them to start contributing to their retirement plans. And they may be
in better shape than some of their parents are today, also who knows whether social security
will survive. So it may be even more important for them. Janet: Definitely, a great point to bring
financial literacy into the picture. Elizabeth: Yes. Janet: Greg, what should somebody do if they
end up sandwiched between financially caring for both a boomerang child and an aging parent.
What advice do you have? Greg: Well, I think a lot of this really boils
down to how much room you have in your budget? How much of it are you willing to sacrifice
and for how long? It’s vitally important that you do not sacrifice your financial preparedness
for retirement. Meaning that don’t tap into your retirement nest egg prematurely. Don’t
sacrifice your ability to make ongoing contributions, which can happen by either not having the
money earmarked for retirement. You’re giving it all to relatives that are living under
your roof or when you quit a job, then you lose that earned income that makes you able
to make retirement contributions. I would caution against those steps, simply because
of the longstanding financial ramifications that they have. Jack: Greg and Elizabeth make some great action
items to do here. And I think they are great points. I think we’ve got to view this, when
you’re in this situation where you’re sandwiched between that child coming back and the elderly
parent. You have to view it as an opportunity. And this is an opportunity to teach your children
by showing them what you’re doing, how you’re taking care of the elderly parent, because
at some point, you’ll be the elderly parent you’ll want them to take care of. But it’s
also an opportunity to teach them about financial planning, and how to put these things into
place because the best way we learn is from experience. So when certain things come along,
and you see what a hindrance it is on someone because they’re parents didn’t save the right
amount of money, that’s going to convince your child that “wow, I don’t want to put
you in that situation. And I don’t want to put myself in that situation.” So we learn
from these experiences. So it’s important that your take a deep breath, and you view
this as an opportunity to teach and to use these experiences to help your children, and
also to do what needs to be done and in essence set an example for those children as well. Elizabeth: And I would also add, from the
multi-generational point-of-view, that if there is a limited amount of money that you
can put toward either side of the sandwich, either the young person or elderly parent,
it seems likely and logical that it might skew a little more to the elderly parent.
Because the young person has many opportunities for earning and saving and can live independently
on a smaller budget. But I think it’s also important to show the young person that giving
that emotional support to an elderly person, a grandparent, is a way that he or she can
contribute even if he doesn’t have any funds to contribute. But to visit, to call, to help
parents when they’re trying to help out their elderly parents, that’s just teaching the
message that we’re all interconnected and it’s a circle of help and it will come around. Kristin: Well, before we end our hangout,
I just want to ask each of our panelists what piece of positive, fun advice would you give
to empty nesters right now? Let’s start with Greg. Greg: Well, I think it’s a great opportunity.
You’ve got a lot of those exciting years that you’ve worked hard for, possibly the past
two or three decades that are in front of you and they’re coming within sight now. So
I think its time that you formulate some of those plans and dreams that maybe you’ve had
all along or find them, and you’re right on the doorstep. So I think it’s sure to be an
exciting time for a lot of people. Jack: I would say to couples when you first
met and fell in love and decided to get married, remember what that was like? Because now you
have an opportunity to go and rediscover yourselves, rediscover things and enjoy and take a look
back on what you’ve accomplished. And to enjoy yourselves and go out there and now rediscover
the love in the relationship that you’ve had, that you’ve built this family for and enjoy
yourselves. Elizabeth: And I’ll just add that, I think
it’s lovely to have plans as a couple. My husband and I are looking forward to being
able to travel more and visit people in this country that we might not have had a chance
to see in a long time. But it’s also a good thing to have independent plans, to take up
a new hobby or interest or class or something you’ve had on the back burner for all of those
child growing years. And then finally, yes, you’re rediscovering yourself as a couple
but we certainly are also having a lot of pleasure. We’re not retired yet, but our kids
are moving through their twenties. And we love being with them, now their out of the
house, they’ve got their own lives, but we can go out to dinner with them and their girlfriends
just as we would with other couples. And just enjoy their company and watch them grow up.
And occasionally, there’s a bail out or a money request, especially when weddings come
along but it’s not so frequent. Jack: And you’ve planned for those contingencies. Elizabeth: [crosstalk] so well Jack. Kristin: Yeah, my mom always said she liked
me better after I moved out. So, it happens. Elizabeth: Absolutely. They’ve got to move
out so you can miss them. That’s the whole thing. Kristin: That’s right, she wanted to miss
me. That’s right. Elizabeth: There you go. Kristin: Well, I want to thank our panelists
today for helping our audience prepare for the empty nest years and some of the financial
and life goal changes that come along with this phase of life. If you’re at a stage in
life where you need to adjust your financial plans, it’s best to consult your financial
planner for your specific needs and goals. I want to thank everybody on our panel again
and everybody for watching. Thank you for joining us.


  • How much can you gift your child every year? And if you have to go to a nursing home can they ask your child to give it back?

  • Being an empty nester comes with a few financial adjustments. Watch our latest Google Hangout to learn what our panel had to say about updating financial plans and priorities once the kids have moved out.

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