Navigating Life and Retirement Without Children

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Who Will Inherit?

Without children, the responsibility of managing your estate falls on your surviving spouse. Simplify this challenging time with a comprehensive estate plan.

A will, the cornerstone of your estate plan, directs the distribution of your assets and appoints an executor to manage your estate. This executor can be your spouse or someone else, such as a friend, attorney, or sibling.

If you die without a will (intestate), your next of kin inherits everything. While your spouse is typically considered next of kin, state laws can vary. A will allows you to leave specific items, like a gold watch, to a nephew or cash to a favorite charity. It also specifies who inherits your assets if both you and your spouse pass away simultaneously. Without a will, the court will distribute your assets to your closest living relative, and if no relatives are found, your property usually goes to the state.

Assets co-owned with your spouse, such as joint bank accounts or real estate held in joint tenancy, generally transfer to your spouse even without a will. Some assets, like life insurance payouts and retirement accounts, are distributed based on the named beneficiary, not a will.

Most people name their spouse as the beneficiary, but this isn’t always the best option. If your spouse can’t manage money, consider choosing a trusted family member to administer the insurance payout or retirement account for them.

Who Will Take Care of You Later in Life?

Planning for later-life care is crucial for child-free couples. Consider these questions:

Who Will Have Power of Attorney?

A medical power of attorney authorizes someone to make healthcare decisions for you if you’re unable to do so. A living will focuses on end-of-life care.

A financial power of attorney allows another person to handle your financial affairs, such as paying bills or taxes. Having these documents in place early can provide peace of mind.

How Will You Pay for Health Care in Retirement?

Retiring before you’re eligible for Medicare at age 65 means finding health insurance. Some employers offer health insurance for retired employees. COBRA coverage through your former employer could tide you over until Medicare kicks in, though it can be expensive. Health insurance through your state’s marketplace or Healthcare.gov may be more affordable.

Budget for copays, deductibles, coinsurance, and medical expenses not covered by insurance. A health savings account (HSA) lets you set aside pretax funds and withdraw them tax-free for qualified medical expenses.

What if One or Both of You Needs Long-Term Care?

If you or your spouse become incapacitated, nursing home or home care costs could deplete your retirement savings. Medicare and private health insurance cover limited skilled nursing care but not long-term care. Medicaid may pay for long-term care if you have a very low income in retirement. If you’re wealthy, you could pay out of pocket. Otherwise, consider long-term care insurance.

Long-term care insurance covers skilled care and assistance with daily living. It’s expensive but can be worth the cost. The Insurance Information Institute recommends purchasing it in middle age.

Where Will You Live?

Without children, you have the flexibility to choose a smaller home or apartment, reducing living expenses. The quality of local schools isn’t a concern, potentially opening more affordable neighborhoods to you.

Buying a starter home in the 50 biggest US metropolitan areas costs approximately $800 more per month than renting a similar space, according to December 2022 data from Realtor.com. Owning a home involves property taxes, homeowners insurance, and maintenance costs.

Renting and investing the difference could deliver a similar return on investment as buying a home while providing more liquid assets. Another option is to use the money saved to build an emergency fund or pay down credit card debt.

Can You Retire Early?

Raising a child to age 18 costs an average of $310,605, according to 2022 Brookings Institute research. What could you do with that extra $18,270 per year? Investing it in retirement accounts and other investments could make early retirement a reality. Whether you embrace the FIRE movement (financial independence, retire early) or gradually phase into retirement is up to you.

The sooner you start saving for retirement, the more time your money has to grow. A nest egg of $1 million is often cited as a basic retirement goal. If you plan to retire at 65 and begin saving at age 25, putting aside $232 per month gets you there. Waiting until age 45 means you’ll need to save $1,545 monthly.

If you plan to retire early, consider investing some funds via a brokerage account. Withdrawing from a 401(k) or traditional IRA before age 59½ triggers income taxes plus a 10% penalty.

What Are Your Priorities?

Once retirement and health care concerns are handled, and you’ve got an emergency fund to cover three to six months without income, how will you spend the money saved on babysitters, Little League fees, and college tuition? Do you want to travel, go back to school, or start a business?

Identify your priorities and incorporate them into your budget. If travel is your passion, set up regular automatic transfers into a vacation fund and use travel rewards credit cards to earn free miles or hotel stays.

A Future of Freedom

As a child-free couple, your path to financial freedom likely looks different from the average person’s. Consider consulting a financial planner and estate planning attorney to advise you on your options and tailor plans for your objectives. Whatever your financial goals, maintaining good credit can help you achieve them, so sign up for free credit monitoring to keep an eye on your credit score.

For any mortgage service needs, call O1ne Mortgage at 213-732-3074. We’re here to help you navigate your financial journey with expert advice and personalized service.

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