Empty nesters, how did your finances change when the birds left the nest

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UncleLongHair
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Empty nesters, how did your finances change when the birds left the nest

Post by UncleLongHair » Sat Dec 02, 2017 4:19 pm

I'm 48 my kids are 12 and 14 and I'm in the throes of high cost of living years and staring down the barrel of college expenses starting in 3-4 years. I have saved and invested pretty well, but I still worry about earning enough money and don't feel like I'm saving as much as I could or should. The unknown cost of college is a big stress factor.

Over Thanksgiving I talked to family and friends who are a bit older, some of whom have kids in college or out of college, and some who recently retired. One thing that surprised me was how many people kept the same jobs and housing after the kids left the nest. I'm definitely interested in retiring as early as I can, and part of that plan is probably selling the house and moving to a smaller house in a cheaper area as soon as possible, which probably means when the kids are definitely out of the house. This could mean when they go to college or when they graduate depending on how that all goes down.

However one thing I found interesting was people telling me how much money they can save with the kids out of the house, they are generally later in their careers and earning good money and aside from the college expenses which they saved for, they can save a lot of money because household expenses are lower and the kids can start to support themselves. This gives people an opportunity to shore up their retirement funds and finish paying off the house and otherwise lay groundwork for retirement.

Or maybe the kids going to college isn't as big a life change as I thought it would be, obviously depends on the situation and if they go to school locally etc. When I was that age I was in a big hurry to move out of the house and was supporting myself at age 16, but I understand that isn't common these days. Anyone have any insights?

Goal33
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Re: Empty nesters, how did your finances change when the birds left the nest

Post by Goal33 » Sat Dec 02, 2017 4:22 pm

It might be that they are saving more money because:
1) They refinanced their house a million times as the rates went down or they've since paid off the house.
2) They are earning more money at work than they used to
3) They are mixing up their ability to save with how generous the market has been
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DrGoogle2017
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Re: Empty nesters, how did your finances change when the birds left the nest

Post by DrGoogle2017 » Sat Dec 02, 2017 4:25 pm

A lot of expenses decrease to very reasonable. For example, my car insurance at the peak for 4 cars was $5000 per year, now it’s $900 per year for one car. I had to jack up liability limits when they were on my policy. Just about everything goes down.

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Re: Empty nesters, how did your finances change when the birds left the nest

Post by Sandtrap » Sat Dec 02, 2017 4:25 pm

Birds cost nearly nothing once having flown the coop.
But, incidents of "failure to launch" or "broken flight wings" can be quite expensive.
Bets are off if they bring back eggs or chicklets.
The only way to minimize costs is to downsize the nest so it only fits two old birds.
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Bacchus01
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Re: Empty nesters, how did your finances change when the birds left the nest

Post by Bacchus01 » Sat Dec 02, 2017 4:31 pm

I don’t know because my kids are still at home. I expect to have kids in college for 12 years from 2019 through 2031 or 32. I want to retire by 2026 or even much earlier.

I have seen few people actually downsize their house. The transaction costs are high (selling, moving, buying) and the extra space to insure the kids come visit or even grandkids has been a big deal for those people.

In my example, our youngest will graduate HS in 2027. Our oldest will be 26 then and may well be on his way to a family (or not). Not sure what we’ll do.

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JDCarpenter
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Re: Empty nesters, how did your finances change when the birds left the nest

Post by JDCarpenter » Sat Dec 02, 2017 4:44 pm

we had three fly away to distant colleges--but only one year involved simultaneous enrollment for all three. I went back to work after being SAH, which almost covered those bills.

Finances changed drastically when they started graduating and we could divert the tuition_Etc. payments to savings. We retired three years after the last one completed undergrad.

Still haven't downsized, as it doesn't cost us much and we like not having to see neighboring houses.
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RudyS
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Re: Empty nesters, how did your finances change when the birds left the nest

Post by RudyS » Sat Dec 02, 2017 4:56 pm

Ours went to a good State school, so tuition and room and board could easily be cash-flowed. That cost went away when they graduated and left. We kept the house, are still in it at age 80, and planning to move to a continuing care retirement community in a few years, so that will be the only downsizing.

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Re: Empty nesters, how did your finances change when the birds left the nest

Post by TomatoTomahto » Sat Dec 02, 2017 5:12 pm

I've made the last tuition payment for one of my kids. His rent and food are still being paid by us, but that's not a big deal. He is well-launched. I have never tallied exactly how much he cost us each year, and just called it $70k, but in real life it was closer to $80k.
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delamer
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Re: Empty nesters, how did your finances change when the birds left the nest

Post by delamer » Sat Dec 02, 2017 5:30 pm

We were saving for college until our second was through freshman year, and we knew we had enough. So our big increase in spendable income was from "no more college money needed."

Assuming that 1) parents stay in the same house and 2) with no change in employment then here is the impact on other expenses when kids are launched:

Expenses that go down significantly:

Groceries
Auto insurance, fuel, service
Health insurance and out-of-pocket costs
Clothing

(Assuming parents were footing the bill for the above, of course.)

Expenses that don't go down:

Mortgage, property taxes, utilities
Payroll taxes
Commuting costs
Retirement savings

Expenses that may go up:

Income taxes (assuming no change in pre-tax retirement savings)

So the degree that parents can save more depends on expenses reductions they experience, net of any increases.

For us, the expenses that went down were a relatively small portion of total expenses (roughly 10% to 15%) so there was not a lot of savings there. And, of course, those expenses did not go away, they just went down.

Also depends on the number of kids that you were supporting. Four gone is different than two gone.

snowox
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Re: Empty nesters, how did your finances change when the birds left the nest

Post by snowox » Sat Dec 02, 2017 5:33 pm

I have two out of the next and two still in and I downsized because that alone was a huge savings and why have all that wasted space. Plus the house is still big enough if one comes home to visit and or?

Secondly, Did they tell you what there doing or are they actually doing it?

I think there is stress with the whole college thing for most anyone because at the very least you want them to succeed and if you have money invested you want to make sure your investment was worth it.

With each kid that leaves our bills go down alot. So we save alot.

You will figure it out and survive it. My suggestion is do what you can do and afford without putting your own future plans at risk. You can do everything right and they can screw it up. You can do everything wrong and they can make in on your own. As most parents we want to help but becareful how far you take that because you want to save for a rainy day!

Good luck to you!

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Re: Empty nesters, how did your finances change when the birds left the nest

Post by Hockey10 » Sat Dec 02, 2017 5:43 pm

I always treated the kids college savings accounts as a separate pot of money that was added to for 18 years and never touched until the first tuition bill came in freshman year. Once you start paying college expenses from that account, your regular day to day expenses go down and the complexity of your day to day life gets easier. Things I can think of:

1. Your grocery bill goes down. This can be a big savings. :moneybag
2. Your water and sewer bill goes down. My kids all take loooooooog showers. :oops:
3. Your electricity bill goes down.
4. You will get better sleep, especially on the weekends. When the kids were in high school and out driving around on a Fri or Sat night, I could never relax until they were home safely. I usually go to bed at around 2230, so I would end up staying up later those nights. Try telling a 17 or 18 year old that they have to be home by 2230 and they will laugh at you. (When they are away at college, the parties are just getting started at that hour).
5. Weekday mornings are easier. You no longer have to pry the kids out of bed in the AM so they can get to school on time. Also on several mornings each week, there is always some kind of crisis such as an Ipad or laptop that has a dead battery and is needed for school, or they can't find their shoes, or they lost their math homework, or _______fill in the blank.
6. I worried less when they were at college, because they did not have a car and had to walk everywhere.
7. When they are finally out on their own and working, your medical bills go down. (During college, medical bills seemed to be higher. Kids would go to parties and not wear a coat, because it would get lost or stolen at the party. So they walked around the college town in cold weather without a coat, which lead to more illnesses).
8. Less car expenses as mileage drops. We went from a 3 car to a 2 car family while my daughter was at college.
9. Our kids all played sports in high school and did not in college. Outfitting a high school hockey or lacrosse player can be very expensive.

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Re: Empty nesters, how did your finances change when the birds left the nest

Post by livesoft » Sat Dec 02, 2017 5:43 pm

One thing that changed is that I let my kids pay for my meals when we go out to eat. They are happy to pick up the check.
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celia
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Re: Empty nesters, how did your finances change when the birds left the nest

Post by celia » Sat Dec 02, 2017 6:05 pm

UncleLongHair wrote:
Sat Dec 02, 2017 4:19 pm
I'm definitely interested in retiring as early as I can, and part of that plan is probably selling the house and moving to a smaller house in a cheaper area as soon as possible, which probably means when the kids are definitely out of the house.
Have you talked to your spouse about this? I've read that although many people talk about downsizing or moving in retirement, only about 10% do.

theplayer11
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Re: Empty nesters, how did your finances change when the birds left the nest

Post by theplayer11 » Sat Dec 02, 2017 6:23 pm

why would it surprise you that people kept their same jobs and homes after their kids left? That doesn't make sense to me.

Sage16
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Re: Empty nesters, how did your finances change when the birds left the nest

Post by Sage16 » Sat Dec 02, 2017 6:44 pm

Cost for kids never goes away it just shifts categories over time. College, weddings, travel expenses if they move outstate. Maybe help with purchasing a home, etc.
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UncleLongHair
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Re: Empty nesters, how did your finances change when the birds left the nest

Post by UncleLongHair » Sat Dec 02, 2017 7:25 pm

Thanks for the comments. Interesting reading.

I should mention that I love my kids and love having them around. However we live in what I consider to be a high cost, high stress area. I don't think we'd live here if it wasn't for the kids, primarily the schools, but also the activities and general environment. Home values are very high and we have a lot of equity in our house, but at the same time probably can't pay it off (owe $600k, value about $1.2M, and we have a relatively small house). I like my job well enough but because costs are high there is always pressure to earn more rather than take a job I like better and it feels like a treadmill. Add all this up and when the kids leave home I'll definitely be looking elsewhere. We can take our $600k of equity and pay cash for a house in many parts of the country, the house might not literally be smaller but it would be downsizing financially.

I see from the responses that not everyone is in the same situation, though we know several families or older couples that have left the area for the same reasons. Anyway thanks for the responses.

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Re: Empty nesters, how did your finances change when the birds left the nest

Post by Sandtrap » Sat Dec 02, 2017 7:27 pm

Sage16 wrote:
Sat Dec 02, 2017 6:44 pm
Cost for kids never goes away it just shifts categories over time. College, weddings, travel expenses if they move outstate. Maybe help with purchasing a home, etc.
So true.
Huge. :shock:
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NYC_Guy
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Re: Empty nesters, how did your finances change when the birds left the nest

Post by NYC_Guy » Sat Dec 02, 2017 7:33 pm

My expenses have gone up. We save a bit on food, clothing and car expenses. But my wife and I travel a lot more than before, and those trips are super expensive. Worth every penny, though.

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Re: Empty nesters, how did your finances change when the birds left the nest

Post by JDCarpenter » Sat Dec 02, 2017 8:52 pm

NYC_Guy wrote:
Sat Dec 02, 2017 7:33 pm
My expenses have gone up. We save a bit on food, clothing and car expenses. But my wife and I travel a lot more than before, and those trips are super expensive. Worth every penny, though.
Once we retired, this is definitely true (travel will be over half of all spending in this first retirement year). For the few years that we both worked after kids' colleges though, we continued to be unable to travel much; therefore, we saved.

Like most everything, YMMV. :beer
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curmudgeon
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Re: Empty nesters, how did your finances change when the birds left the nest

Post by curmudgeon » Sat Dec 02, 2017 11:36 pm

Individual circumstances vary a lot. We had kids while fairly young, so we pretty much wrapped up college expenses by late 40's. We had set a limit for what we would fund for college (we'd pay up to the costs of the top in-state public uni, kids had to figure out the rest if they went more expensive), and we were pretty much able to cash-flow those costs by limiting other saving during that time. Once the kids were gone, we could crank up savings a lot (including paying down the mortgage faster). We also (cautiously) opened up spending a notch; think of it as "consumption smoothing", by doing more traveling etc before retirement. In our 50's I figured that approximately 1/3 of our gross went to taxes, 1/3 to expenses, and 1/3 to savings of various forms (including mortgage principal but not interest/taxes). We also chose jobs based on good work environment, rather than what paid the best. We were lucky to some extent, but we also really benefitted from a lifelong LBYM mindset which meant we didn't have a lot of impingements to cash flow in the form of car loans or expensive ongoing bills. Retired at age 57/58, and downsized to 2000sf (though still in silicon valley for now).

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Re: Empty nesters, how did your finances change when the birds left the nest

Post by RudyS » Sun Dec 03, 2017 12:41 pm

livesoft wrote:
Sat Dec 02, 2017 5:43 pm
One thing that changed is that I let my kids pay for my meals when we go out to eat. They are happy to pick up the check.
We do this in a different manner. I pay for all the meals. In the end, they do pay, but for now, better cash flow for them.

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Re: Empty nesters, how did your finances change when the birds left the nest

Post by stoptothink » Sun Dec 03, 2017 12:53 pm

Sage16 wrote:
Sat Dec 02, 2017 6:44 pm
Cost for kids never goes away it just shifts categories over time. College, weddings, travel expenses if they move outstate. Maybe help with purchasing a home, etc.
But those costs are all discretionary; very much so. My mother has 7 kids (6 out of the house), the total cost of all those expenses for her: $0 over the course of about 20 years since the oldest moved out (and 5 of us are college graduates and married, and 3 live out of state).

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Re: Empty nesters, how did your finances change when the birds left the nest

Post by TomatoTomahto » Sun Dec 03, 2017 1:02 pm

RudyS wrote:
Sun Dec 03, 2017 12:41 pm
livesoft wrote:
Sat Dec 02, 2017 5:43 pm
One thing that changed is that I let my kids pay for my meals when we go out to eat. They are happy to pick up the check.
We do this in a different manner. I pay for all the meals. In the end, they do pay, but for now, better cash flow for them.
I figure I’m reducing their inheritance, one meal at a time, one Tesla at a time, one tuition payment at a time. They’re smart enough to have figured that out, and loving enough to not mind.
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Re: Empty nesters, how did your finances change when the birds left the nest

Post by DrGoogle2017 » Sun Dec 03, 2017 1:05 pm

RudyS wrote:
Sun Dec 03, 2017 12:41 pm
livesoft wrote:
Sat Dec 02, 2017 5:43 pm
One thing that changed is that I let my kids pay for my meals when we go out to eat. They are happy to pick up the check.
We do this in a different manner. I pay for all the meals. In the end, they do pay, but for now, better cash flow for them.
Now I know why I’m always generous to them, I help them spend their money up front.

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Re: Empty nesters, how did your finances change when the birds left the nest

Post by CyclingDuo » Sun Dec 03, 2017 2:16 pm

Hockey10 wrote:
Sat Dec 02, 2017 5:43 pm
1. Your grocery bill goes down. This can be a big savings. :moneybag
2. Your water and sewer bill goes down. My kids all take loooooooog showers. :oops:
3. Your electricity bill goes down.
7. When they are finally out on their own and working, your medical bills go down.
8. Less car expenses as mileage drops. We went from a 3 car to a 2 car family while my daughter was at college.
^^This! Thanks Hockey10 for nailing it quite well in your list.

We are just a few months into the new empty nest years, so are still in the process of getting a handle on how it is changing our overall cash flow/finances. In our situation, the transition will be a little longer as one of our children still has 1 1/2 years to go in graduate studies, but the other is cash flow positive since July in the start of a career out on the West Coast. We are already starting to notice the obvious as in our household cash flow as a result.

The first lowered bills have been starting to arrive - as you mention - in your post: groceries, automotive, insurance, electricity, water/sewer, medical. We can relate to those long, hot showers they were taking while home!!!! :annoyed

In anticipation of the nest emptying, we boosted our savings last year to 24.58% that went solely to retirement savings and a bit more added to our usual discretionary fund savings. This year, we jacked that up to 64% of annual income going to retirement to take advantage of the over age 50 catch up and maximum contribution we can make in both the 403b and the Roth IRA contributions. An additional motive for this was a strategy to help absorb some ordinary income gains from inheritance.

As the dust settles from all of this, we will see how the cash flow strategy of super charging our savings continues to work as we move into 2018. Things will be much more telling once we get into tax preparation for our 2017 taxes to see how it all turned out.

However, overall household cash flow from the utilities, food, fuel, insurance, and medical alone are providing a nice welcome boost which we plan on capitalizing on for our final 8-11 years of employment by socking more away than we have been able to during their high school and "two in college" years.

With regard to the OP's question(s), we have no plans to downsize the house just yet as only 11% of our income goes towards housing at this point, and we live in a rather LCOL area. The empty nest cash flow improvement will not change that much while your children are still in college (whether they live at home and attend a local college, or are away at a school living in a dorm or apartment). You will most likely have much higher costs and cash flow constipation during those years. It's when they finish college, get going in a career making their own money where the insurance, food, housing, medical, utilities, transportation is off your back and your cash flow starts flowing in a very positive direction.

It's only 8-10 or so years away for you. Hang in there, you only get to go through this rodeo one time - so enjoy it.
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Re: Empty nesters, how did your finances change when the birds left the nest

Post by TomatoTomahto » Sun Dec 03, 2017 2:22 pm

Hockey10 wrote:
Sat Dec 02, 2017 5:43 pm
2. Your water and sewer bill goes down. My kids all take loooooooog showers. :oops:
9. Our kids all played sports in high school and did not in college. Outfitting a high school hockey or lacrosse player can be very expensive.
Maybe it's the hockey connection, but my hockey players also took showers long enough that, had I attempted it, it would have resulted in me fainting.
One of my kids still plays in college, but on the Club team. The other doesn't, which is a good thing, because . . . GOALIE :oops:
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