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Overcoming empty nester spending syndrome


En español | Braces, check. Music lessons, check. School tuition, check. Moms and dads across the U.S. look forward to the day when their children “fly the coop.” In a way, it’s a leap into financial independence for everyone involved.

For the kids, it’s an exciting — albeit challenging — opportunity to be masters of their own destiny. For the parents, it’s like bringing home an extra paycheck, providing them with the well-deserved freedom to splurge! But a recent study indicates that this spending spree isn’t just instant or short-lived gratification. In fact, it can last for many years — preventing many empty nesters from attaining the savings necessary for retirement.

“Households do not increase their savings very much, even when the kids leave home,” says the study.1 On average, over the eight years following the departure of their last child, empty nesters increase their saving in 401(k) plans by just under one percent. The same researchers found that 52% of working age households are at risk of being unable to maintain their standard of living after they stop working. The study goes on to say that these findings “support the view that the retirement savings crisis is real.”

For empty nesters, the urge to go hog wild is understandable. According to the latest government figures, families with incomes of $106,540 or more spend an average of $20,000–$25,000 a year on each child under the age of 18 — not counting college costs.2 But overspending is just one mistake many empty nesters make.

Three mistakes empty nesters make in addition to overspending

1) Not selling your home

That 5-bedroom beauty you built 25 years ago was a great place to raise a family, but now that the kids have moved out, do you really need all that space and the burden of maintaining it?

A little more can go a long way

Increasing the amount you contribute to your 401(k) plan can add substantially to your account balance as you approach retirement.


Increasing contribution rate from 5% to 7% can add an additional:

Increasing contribution rate from 5% to 10% can add an additional:

7 years



10 years



15 years



This hypothetical illustration assumes a salary of $65,000, contribution rates of 7% and 10%, contributions made at the beginning of each month, and a 6% annual effective rate of return, compounded monthly. Hypothetical results are for illustrative purposes only and are not meant to represent the past or future performance of any specific investment vehicle. Investment return and principal value will fluctuate and when redeemed the investments may be worth more or less than their original cost. Taxes are due upon withdrawal. If you take a withdrawal prior to age 59½, you may also be subject to a 10% additional federal tax.

2) Not taking full advantage of your 401(k)

Increasing your contribution rate just slightly can result in a substantial difference down the line. And remember, if you’re over age 50, you may be eligible to take advantage of the annual catch-up contribution — which can result in even bigger savings. Take a look at the example to the right.

3) Assuming your expenses will go down

While you might think your expenses will decrease as an empty nester, many times they stay the same or go up. At the very least, you should assume an inflation rate of about 3% a year, which might not sound like a lot. But when you look at the types of expenses you’ll have in retirement, the actual inflation rate could be much higher. And that’s especially true for healthcare expenses, which have drastically outpaced the overall inflation rate.

Spend or save — it’s up to you

Whoever coined the phrase “Life is too short,” was really onto something — especially as it pertains to being a parent. You might feel that after all the sacrifices, becoming an empty nester means it’s your time to indulge and pamper yourself. And no one can blame you!

A trip to China might be on your bucket list. But a motorcycle, gourmet kitchen, and an RV might be on the list also. If you insist on having too much expensive fun after your kids are moved out, you may wind up dependent upon them when you retire. Sound crazy? Quite the opposite. In fact, the proportion of adult children providing personal care and/or financial assistance to a parent has more than tripled over the past 15 years.3

If you insist on having too much expensive fun after your kids are moved out, you may wind up dependent upon them when you retire.

Bottom line? You deserve to have some fun, but you’re still a role model for your children and should remember that moderation is the name of the game. “It may be hard to think about retirement when it is 15 or 20 years away, but it is a good idea to keep things in perspective,” says Debra Greenberg, Director, Personal Retirement Solutions at Merrill Lynch. Use good judgment in allocating the increase in your disposable income and make sure that you put some money away for the days ahead when you are free from both your parental and career-related responsibilities. Chances are you’ll be very glad you did.

Learn more and take action

  • Increasing contributions to your 401(k) is always a good idea — even more so if you find you have additional income to invest. If your 401(k) plan is through Merrill Lynch, go to Benefits OnLine® to access your account.
  • Time to review or establish a budget? This worksheet can help.
  • If you’re feeling it’s time to sell your home, contact your realtor. Don’t have a realtor? Ask your family members or friends who have bought or sold their properties recently for recommendations.
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1 Source: “Do Households Increase Their Savings When the Kids Leave Home?” by Irena Dushi, Alicia H. Munnell, Geoffrey T. Sanzenbacher and Anthony Webb, The Center for Retirement Research at Boston College, September 2015.

2 Source: U.S. Department of Agriculture, “Expenditures on Children by Families,” 2014.

3 Source: “The MetLife Study of Caregiving Costs to Working Caregivers,” June 2011.

Merrill Lynch does not provide tax, accounting or legal advice. Please consult your own independent advisor as to any tax, accounting or legal statements made herein.