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Financial Planning for Child-Free Couples

Being child-free comes with its own set of financial considerations and opportunities. While you may enjoy the freedom of sleeping in on Sunday mornings instead of attending soccer games, there are important questions to address regarding your future. This article explores key financial planning aspects for child-free couples and how O1ne Mortgage can assist you in achieving your financial goals.

Who Will Inherit?

Without children, the responsibility of handling your estate falls on your surviving spouse or designated executor. Creating an estate plan is crucial to ensure your wishes are honored. A will is the cornerstone of your estate plan, guiding the distribution of your property and naming an executor. This executor can be your spouse, a friend, an attorney, or a sibling.

If you die without a will, your next of kin inherits everything, which may vary by state. To ensure specific bequests, such as leaving a gold watch to a nephew or cash to a favorite charity, a will is essential. Additionally, a will can specify 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, or if no relatives are found, your property may go to the state.

Assets co-owned with your spouse, such as joint bank accounts or real estate, generally transfer to your spouse without a will. However, some assets like life insurance payouts and retirement accounts are distributed based on the named beneficiary. It’s important to consider whether naming your spouse as the beneficiary is the best option, especially if they may struggle with managing money.

Who Will Take Care of You Later in Life?

Planning for later-life care is critical for child-free couples. Here are some key considerations:

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. Additionally, a financial power of attorney allows someone to handle your financial affairs, such as paying bills and taxes. Having these documents in place early can provide peace of mind.

How Will You Pay for Health Care in Retirement?

Retiring before age 65, when Medicare eligibility begins, requires finding alternative health insurance. Some employers offer retiree health insurance, and COBRA coverage through your former employer may be an option, though it can be expensive. Health insurance through your state’s marketplace or Healthcare.gov may be more affordable.

Budgeting for health insurance premiums, copays, deductibles, and other medical expenses is essential. A health savings account (HSA) allows you to set aside pretax funds and withdraw them tax-free for qualified medical expenses.

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

Nursing home or home care costs can deplete your retirement savings. Medicare and private health insurance cover limited skilled nursing care but not long-term care. Medicaid may cover long-term care for those with very low income, while the wealthy may pay out of pocket. For those in between, long-term care insurance is a valuable option, though it can be expensive and requires passing a medical exam.

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 home in major metropolitan areas can be more expensive than renting. Consider the costs of a down payment, mortgage, property taxes, homeowners insurance, and maintenance. Renting and investing the difference could provide a similar return on investment while offering more liquid assets. Alternatively, use the savings to build an emergency fund or pay down debt.

Can You Retire Early?

Raising a child to age 18 costs an average of $310,605, according to 2022 Brookings Institute research. Investing this money 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, the sooner you start saving, the better.

A nest egg of $1 million is often cited as a basic retirement goal. Starting at age 25, saving $232 per month can get you there by age 65. Waiting until age 45 requires saving $1,545 monthly. Consider investing some funds via a brokerage account to avoid penalties for early withdrawals from retirement accounts.

What Are Your Priorities?

Once retirement and healthcare concerns are addressed, and you have an emergency fund, consider how to spend the money saved on childcare expenses. Whether you want to travel, go back to school, or start a business, prioritize your goals and build them into your budget. For example, set up 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 may differ from others. Consulting a financial planner and estate planning attorney can help tailor plans to your objectives. Maintaining good credit is also crucial, so consider signing up for free credit monitoring to keep an eye on your credit score.

At O1ne Mortgage, we understand the unique financial needs of child-free couples. Whether you’re planning for retirement, buying a home, or investing in your future, we’re here to help. Call us at 213-732-3074 for any mortgage service needs. Let us assist you in achieving your financial goals and securing a prosperous future.

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