Take Advantage of an Empty Nest to Built Your Retirement Fund

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Use Nest Egg for Retirement Fund

Use Nest Egg for Retirement Fund

Most parents agree that saving money and raising kids are hard goals to meet simultaneously. Money that might otherwise go toward retirement or paying down the mortgage is instead spent on clothes, extra-curricular activities and higher education for the children. Once kids are out of the house, parents have an opportunity to get their savings back on track, especially their retirement savings.

Unfortunately, few parents take advantage of their increased discretionary income in that way. According to a recent study by Boston College, “empty-nesters” increase their spending by an average of 51 percent in the first few years after kids leave the house. Though some eventually reign in their spending and begin saving more, many get used to the higher standard of living and never return to lower spending levels. This creates a two-fold problem: first, parents who fell behind in their retirement saving never “catch-up” and as a result are not able to retire as soon as they’d like, if at all; second, they also get used to the higher standard of living, which will be all but impossible to maintain when, and if, they retire.

The desire to splurge is understandable, and not entirely bad. But parents whose kids have recently moved out of the house (or will do so in the near future), should do two things: 1) set a limit, and 2) create a budget plan.

Set a Limit

First, set a limit on your extra spending. It’s best to set both a dollar amount and a timeframe. For example, maybe you and your spouse agree that it’s ok to spend an extra $3,000 over the next six months. But at the end of the six months, your splurging is finished, even if you haven’t spent $3,000. This will give you some freedom, but prevent you from risking your savings and/or retirement. Rather than setting a lump sum, you could also break it down by month. For example, you could allow yourself to spend an extra $500 or $600 a month for the next four months.

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Create a Plan

Second, when you’ve decided how much you’re comfortable spending, decide how you’d like to spend the extra money. Maybe you’d like to go on a shopping spree, or take a well-deserved vacation. Maybe you’d like to convert a child’s old room into an office, join a country club or get season tickets to the theatre. Make these decisions before you spend one extra penny. It will allow you the luxury of splurging a bit, but not to the detriment of your retirement.

Once your timeframe is up and dollars have been spent, commit to putting extra money into your retirement investments. Create a plan for this as well. Decide how much you want to put away each month, and how much you want to have invested and saved by the end of the year. It’s also helpful to revisit your goals regularly – at least once a year, if not more. Make sure your retirement savings is on track and check the performance of your investments.

It’s okay for mom and dad to have a little fun when the kids first move out, but it should be planned and limited. By taking advantage of the extra discretionary income that becomes available when children leave the nest, parents can make sure they have what they need for retirement, unexpected expenses and even for the occasional splurge.

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For more tips and tools to help you make the most of your money, including a Credit Personal Trainer that will show you how to whip your credit into shape, visit Quizzle.com. And check out these other money-saving articles: