What to Do When Your Kids Move Out: A 5-Step Financial Guide

When your last child leaves the nest, the emotional impact of becoming an empty nester is often the focus, but the financial impact is just as significant.

It’s now time to shift from funding your children’s needs to securing your own next chapter.

Thoughtful financial planning for empty nesters can turn this transition into an opportunity. If you're wondering what to do financially when your kids move out, this guide walks you through the key steps, from how to reduce expenses after kids leave home to maximizing your retirement savings.

Here are five practical financial steps to help you make the most of your empty nest years:

1. Start Empty Nest Budgeting

With the kids out of the house, your daily spending will likely look different.

From lower grocery bills to reduced utility usage, these small shifts can add up to significant monthly savings.

• Identify New Savings: Review your eStatements for the first 3-6 months after your child moves out. Calculate how much extra cash flow you have now that you aren't covering extra groceries, utilities, or other expenses like their cell phone service or car insurance.
• Redirect the Surplus: It can be easy to let those extra funds disappear into discretionary spending. Instead, allocate that money to a new financial goal, such as retirement savings or debt reduction.

2. Maximize Your Retirement Contributions

Now is the time to boost retirement savings in your 50s and 60s since these are peak earning years for most people.

Coupled with lower household expenses, this is a prime time to maximize contributions to your retirement accounts.

• Make Catch-Up Contributions: If you are 50 or older, you can take advantage of catch-up contributions for your 401(k) or IRA. This allows you to contribute more than the standard annual limits, up to $8,000 over the standard limit for 401(k)s and $1,000 for traditional or Roth IRAs, which can significantly boost your nest egg.
• Consider Increasing Each Year: Some retirement accounts allow you to automatically increase your contribution percentage each year. Even a 1% or 2% increase each year can make a big difference over the next decade.

3. Pay Off Outstanding Debt

Entering your next chapter with fewer financial obligations provides a sense of freedom and security.

Take advantage of your empty nest status to eliminate debt that may have accumulated during your child-rearing years.

• Run the Numbers: Use our debt consolidation calculator to determine your total debt burden and whether it might be possible to consolidate your debt from multiple sources into a single, low interest loan.
• Prioritize High-Interest Balances: If you’re carrying most of your debt in credit cards, use our credit card payoff calculator to identify how long it will take you to pay off your debt based on different scenarios. If you can’t make larger payments or consolidate your credit card debt, then focus on paying off credit cards with the highest interest rates first.
• Pay Down Your Mortgage: If you aren’t carrying a lot of debt in other areas, consider making extra payments toward your mortgage principal. Reducing your balance now could lead to a mortgage-free retirement.

4. Re-Evaluate Your Housing Needs

An empty nest often means you are living in more house than you actually need. Rethink your lifestyle to free up substantial capital for your future.

• Consider Downsizing: Moving to a smaller, more efficient home can come with a much lower mortgage payment, property taxes, insurance, and maintenance costs.
• Tap Into Home Equity: If you decide to stay in your family home, a Home Equity Line of Credit (HELOC) can be a smart tool for making improvements that increase your property value or allow you to comfortably — and safely — age in place.

5. Explore Your Planning Options

As your immediate financial goals shift from providing for your family to preserving wealth for your retirement, it’s time to move from basic savings to more sophisticated options for growing your wealth.

• Schedule a Financial Wellness Check: Meet with a local banker and receive guidance to improve your overall financial health. Review your accounts, discuss your goals, and help you find ways to save money, reduce debt, and plan for the future. 
• Diversify Your Savings: Explore options beyond a traditional savings account, such as Money Market accounts or Certificates of Deposit (CDs), which typically offer higher interest rates.

Embrace Your Next Chapter and the Opportunities It Brings

At Carter Bank, we believe that every new stage of life is an opportunity for growth. We’re here to provide professional, knowledgeable guidance to help you navigate this transition to empty nester.

Ready to refocus your finances? Start here:

• Audit your expenses: Identify three areas where your spending has decreased since the kids moved out. Direct this new surplus to savings for your retirement.
• Boost one contribution: Increase your retirement or savings contribution by at least $100 this month. If you can increase your contribution year-over-year, even better.
• Update your records: Meet with our associates to ensure your important documents and beneficiaries are up-to-date heading into your new chapter.

Your children have embarked on their journey toward a life lived full. Now it’s time to enjoy yours!