The phrase “empty nest” may sound sad and lonely. But—shh!—don’t let the kids know that when they clear out, Mom and Dad have fun. Often too much fun. A study by the Center for Retirement Research at Boston College found that empty-nesters spend 51% more than they did when their children were home. “We have clients who go out to lunch and dinner every day,” notes Cincinnati financial planner John Evans.
Certainly after surviving Little League, teenage attitude, and the colossal cost of college, you deserve to splurge. But you also don’t want to compromise your finances as you begin the final sprint to retirement. Here are three ways to keep feathering your nest while still enjoying your freedom.
First, Keep Your Spending in Check
- Rerun your numbers. While you can likely afford to let loose a bit, make sure your retirement plan is in order before you go wild. “You should save a bare minimum of 10% a year, really more like 15%—and if you’re behind you may need to save 20% to 30%,” says Boca Raton, Fla., financial planner Mari Adam. Use T. Rowe Price’s retirement income calculator to see what you need to put away to get your desired income.
- Make a payoff plan. Erasing your debts before retirement will require sacrifice now—but will take pressure off your nest egg and allow you to have more fun later. Figure out how to do it with the debt calculator at CreditKarma.com.
- Plug the kid leak. One in four affluent parents ages 50 to 70 surveyed recently by Ameriprise said that supporting adult children has put them off track for retirement. Lesson: Get your priorities (retirement and debt elimination) straight first, and build gifts into your annual budget proactively vs. giving willy-nilly.
Second, Free Up Even More Cash to Stash
- Downsize. Convert Junior’s room into a better tomorrow: Moving from a $250,000 house to a $150,000 one could boost your investment income by $3,000 a year while reducing maintenance and taxes by $3,250, the Center for Retirement Research found.
- Cut your coverage. If your kids are working, you may not need life insurance to protect them. You may be able to take them off health and auto policies too.
- Moonlight. Besides increasing your income and helping you establish a second act, “self-employment makes a huge difference in what you can do on your taxes,” says Tony Novak, a Philadelphia-area CPA. That’s especially valuable in these peak earning years when you’ve lost the kid write-offs.
Finally, Supercharge Tax-Efficient Savings
- Catch up on your 401(k) and IRA. Once you hit 50, you can sock away $5,500 more in your 401(k) this year, for a total of $23,000, and an extra $1,000 in your IRA, for a total of $6,500. In 2015, you’ll be able to put an extra $6,000 in your 401(k), for a total of $24,000; IRA caps remain unchanged. If you start moonlighting, as suggested above, you can shelter more money in a SEP-IRA—the lesser of 25% of earnings or $52,000.
- Shovel cash into that HSA. Got a high-deductible health plan? Families can contribute $6,550 ($7,550 if you’re 55-plus) to a health savings account. Contributions are pretax, money grows tax-free, and you don’t pay taxes on withdrawals for medical expenses. If you can pay your deductible from other savings, let your HSA grow for retirement, Novak says.
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Sources: Employee Benefit Research Institute, PulteGroup, MONEY calculations