Your Money: How empty nesters can adjust their investing style for the next chapter

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By David Wentz

David Wentz of Tax Favored Benefits, Inc.

As parents move into the phase of life known as “empty nesters,” their financial priorities often shift. With children grown and potentially out of the house, this stage presents unique opportunities for empty nesters to reassess their investment strategies and plan for a secure and fulfilling future. Here are some essential tips on how to adjust your investment style for the empty nesters’ phase.

  • 1. Reevaluate Your Financial Goals: As an empty nester, your financial goals will likely differ from those of your child-rearing years. Take the time to reassess your objectives and determine what you want to achieve with your investments. Whether it’s retiring early, traveling, supporting causes you care about, or leaving a legacy for your loved ones, having clear goals will guide your investment decisions.
  • 2. Assess Risk Tolerance: Empty nesters often have a lower risk tolerance since they are no longer relying on their investments to fund their children’s education or other major expenses. Prioritize preserving your wealth and focus on more stable and conservative investments. However, don’t abandon growth-oriented assets entirely, as you still need to combat inflation and maintain purchasing power over the long term.
  • 3. Diversify Your Portfolio: Diversification remains a fundamental principle of investing. Spread your investments across various asset classes, such as stocks, bonds, real estate, and alternative investments, to reduce risk and enhance potential returns. Adjust the asset allocation to reflect your new risk tolerance and financial goals.
  • 4. Consider Income-Generating Investments: As you approach retirement, creating a reliable stream of income becomes increasingly crucial. Look into income-generating investments like dividend-paying stocks, bonds, annuities, or rental properties. These assets can supplement your retirement income and provide financial stability during your golden years.
  • 5. Maximize Retirement Contributions: Take full advantage of retirement accounts like 401(k)s, IRAs, or Roth IRAs. Catch-up contributions become available for individuals aged 50 and older, allowing you to contribute more and accelerate your retirement savings. Additionally, these accounts offer tax advantages that can further bolster your investments.
  • 6. Minimize Debt: Entering retirement with minimal debt can significantly improve your financial security. Work on paying off outstanding loans, especially high-interest debts
    like credit cards. Reducing financial burdens will free up more of your income for investments and other retirement pursuits.
  • 7. Review Insurance Coverage: Empty nesters may want to reassess their insurance needs. Life insurance, for example, might not be as critical if your children are independent and financially stable. On the other hand, long-term care insurance becomes more important as you age to protect against potential healthcare costs.
  • 8. Seek Professional Advice: As you transition into this new phase of life, consider seeking advice from a certified financial planner or investment advisor. A professional can help you navigate complex financial decisions, create a tailored investment plan, and provide peace of mind.
  • 9. Stay Informed and Be Flexible: Economic conditions and personal circumstances can change. Stay informed about the market and regularly review your investment strategy to ensure it aligns with your evolving goals and risk tolerance. Be prepared to make adjustments as necessary to optimize your financial future.
  • 10. Embrace Life After the Nest: Becoming an empty nester opens up a world of possibilities. Focus on enjoying this new chapter of your life while maintaining a prudent approach to your investments. Pursue your passions, explore new hobbies, and spend quality time with loved ones, all while confidently building and managing your financial assets.

In conclusion, adjusting your investment style as an empty nester requires thoughtful consideration of your financial goals, risk tolerance, and life circumstances. By making prudent investment decisions, you can enhance your financial security and make the most of this exciting stage of life. Remember, it’s never too late to take control of your financial future and embrace the possibilities that lie ahead.

This Sponsored Column is by Tax Favored Benefits Inc., an Overland Park-based financial investment firm that works with clients to create custom wealth management strategies driving by your needs. Our experienced professionals provide a full suite of wealth, investment and retirement planning services to clients across the country.

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