The Greenes: Empty Nesters With Big Plans for the Future

Evelyn and Alan Greene* had mixed feelings when their youngest child finished college and moved into her own apartment. While they would miss having her around the house, they were also excited about the prospect of concentrating on their own plans for the future.

No More Mortgage or Tuition Payments
The Greenes worked hard to save for their children’s education and it paid off. Both of their daughters were able to attend the colleges of their choice and only required minimal student loans. But tuition was expensive, and Alan and Evelyn are glad to have those costs behind them.

The Greenes also achieved another milestone when they made the final payment on their 30-year mortgage. Now they plan to live in their house until Alan retires in 10 years. After that, they’ll consider selling it and moving to a smaller house or condominium. Paying off their mortgage, in addition to their newly empty nest, has freed up considerable assets for the Greenes. They agreed to redirect the majority of those assets into their retirement plan investments, in order to take full advantage of tax-deferred earnings potential over the next 10 years.

Aggressive Investment Choices
Alan was able to boost his retirement plan contributions to the maximum allowed. He still has 60% of his plan assets in stock investments, to take advantage of their growth potential over time. Evelyn found that she could increase her contributions by 50% — from 8% to 12% of her pre-tax salary. Because Evelyn is a more aggressive investor, she will keep 70% of her assets in stock investments, including some international stock funds.** She also plans to work longer and begin withdrawals later than Alan, giving her a longer investment time horizon.

In addition to the long-term goal of a comfortable retirement, the Greenes also have some short-term objectives in mind. One of these is a trip to Europe — something they couldn’t afford to do with children at home and mortgage payments to make. Now that they’ve increased their retirement plan contributions, their next priority is a vacation savings account. The Greenes hope to book their trip for next spring. With careful planning they won’t have to postpone all of their fun until retirement.

*The investor profile is hypothetical. Examples are hypothetical and do not represent the performance of any actual investment. Allocations are presented only as examples and are not intended as investment advice. Please consult a financial adviser if you have questions about these examples and how they relate to your own financial situation. Distributions will be subject to taxation upon withdrawal at then-current rates. In addition, early withdrawals before age 59 1/2 may be subject to a penalty tax. Consult a financial planner for information about your particular circumstances.
** Investors in international securities are sometimes subject to somewhat higher taxation and higher currency risks, as well as less liquidity, compared with investors in domestic securities.

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