Before the economy took a turn for the worse into a recession, there was a simple, concrete plan for parenting and finances: you raised your children, they got a job after high school or college, and they moved out—leaving you with the house to yourselves again.
Today, this has changed. In recent years, more and more children have returned home after college. According to a survey by the Pew Research Center, around three in 10 Americans aged 25-34 live with their parents or have lived with them recently.
And this trend is really putting a kink in parents’ finances. Having to support adult children unexpectedly means that many parents are a little worse off than they would be—having less to put toward retirement and their own lifestyle.
When your children finally leave the nest, you’re wondering what to do with your finances. The impulse is to put that money to indulgences, like dinners out and vacations. By all means, do so! You’ve certainly earned it.
Just remember to also put the money that was previously earmarked for your kids into your retirement. You can put “catch-up contributions” of $5,500 in your 401(k) and $1000 extra in your IRA above the maximums, if you’re 50 or older.
If having the kids at home has put you far behind in retirement (and it’s right for your finances), you can also consider downsizing into a less expensive house and investing the difference.
Talk with an Alpharetta financial planner to see you how can make up your retirement savings now that you have an empty nest.