The Empty Nesters' Guide to Spending

by Jean Chatzky
Photograph: Illustration: Christian Northeast

My friend Mary Ann sent a note with her annual holiday card saying it would be her last. Her third son had headed off to college, and she and her husband were marking the occasion by stripping away obligations such as holiday cards, large vats of laundry and excessive food shopping. “Bring on the Viagra!” she wrote.

She had the right idea. It turns out an empty nest is a happy nest: The marital satisfaction of women ages 43 to 61 is higher for those with no kids at home, according to a recent study. The marriages are happier not just because couples have more time together but also because the quality of that time improves. Single parents, too, have reported feeling relief in getting their lives back after their children leave home. In all the excitement, it’s easy to neglect your finances. Don’t. Here’s what to do.

Call your insurance carriers and adjust your coverage

CAR INSURANCE Having a teenager on your policy can increase your premiums by 50 to 100 percent. If your kid will be living more than 100 miles from home and won’t have a car, let your agent know. You’ll see big savings.

LIABILITY INSURANCE Make sure you have an umbrella liability policy that is at least equal to your net worth, says financial planner Ross Levin of Edina, Minnesota. This insurance is relatively cheap ($1 million in coverage costs $150 to $300 a year; the next million is about $100), and it will shield you beyond the coverage you carry in your home and auto policies in the event of a lawsuit stemming from an accident on your property (for instance, if a guest slips and falls at your house).

HEALTH INSURANCE If you picked a plan because of a child’s needs (such as asthma or diabetes) and that child is now insured through school or a job, you may be able to reduce your costs by switching to a different option. If not, the new health care law stipulates that children can remain on their parents’ policies until age 26, starting this September.

DISABILITY INSURANCE Having a pol-icy can keep you in your home and your kids in college if you become ill and are unable to earn your paycheck. For people with big monthly expenses, I often suggest supplementing an employer-based policy with an individual one. But now, if your kids are out of college and have jobs of their own, you may want to drop that extra policy. (The cost of employer-based disability coverage averages only $238 a year, so keeping that is a good idea.)

LIFE INSURANCE “When you’re young with little kids, you need life insurance to create an estate—to pay for college and pay off the house,” Levin says. “When you’re older, you could cancel. If your kids want the inheritance, see if they will pay the premium.” (There could be tax implications; talk to your planner first.)

LONG-TERM-CARE INSURANCE If you will eventually want choices in nursing homes or home care, this is one type of insurance you should consider adding. It is a particularly good option for people with $300,000 to $2 million in assets. If you have less than $300,000 and need to go into a nursing home, you’ll quickly run through all your money and qualify for Medicaid; if you have more than $2 million, you should have enough income from investments to pay out of pocket if you need to.

The time to purchase a policy is in your late fifties or early sixties. If you buy younger than that, you’ll spend too much on premiums. If you wait until you’re older, you run the risk of not qualifying because of your health. Some 23 percent of policy applicants in their sixties don’t pass the physical; in their seventies that number climbs to 45 percent. And note: If you can afford to buy a policy for only one of you—you or your spouse—you should probably get the nod. Statistically, more women need nursing care than men, because we live longer.
 

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