Empty Nester Finance Guide
When the last child leaves home, your financial landscape changes. The mortgage that once supported a family may now be oversized for two people, your insurance needs change, and you may have more disposable income to direct toward paying down debt or building retirement savings. This is an ideal time for a comprehensive financial review.
1Key Financial Priorities
Reassess whether your home still suits your needs
Many empty nesters find they are maintaining more space than they use or need. Downsizing can eliminate the remaining mortgage, free up capital for retirement savings, and reduce ongoing costs like rates, insurance, and maintenance. At age 55 or older, the downsizer contribution scheme allows up to $300,000 per person into super from the proceeds.
Accelerate your mortgage payoff
With reduced household expenses, you may be able to significantly increase your mortgage repayments. Reducing a $400,000 loan by an extra $1,000 per month can cut more than 8 years off a 25-year loan and save over $100,000 in interest. Run the numbers with our mortgage calculator.
Review and reduce insurance costs
Your life insurance needs decrease when dependants become financially independent. Review whether your current coverage is sized appropriately for your actual obligations. Reducing or cancelling unnecessary coverage can free up hundreds of dollars per month.
Maximise super contributions in the final working years
The years between children leaving home and retirement can be among your highest-saving years. The concessional contribution cap is $30,000 per year. Salary sacrificing into super at 37% or 45% marginal tax rates provides significant after-tax advantages.
2Best Loan Types for This Stage
Variable Rate (Pay Down Fast)
Best for accelerated payoffA no-frills variable rate loan with unlimited extra repayments and no fees allows you to direct surplus income directly to your mortgage without restriction.
Fixed Rate (Short Term)
Consider if near retirementFixing your rate for 2 to 3 years provides certainty as you approach a fixed income. Ensure you model the break costs before fixing if you anticipate selling or fully paying off the loan.
Downsizer Home Loan (Smaller Loan)
Consider if downsizingMoving to a smaller property with a smaller loan allows you to access lower LVR rate tiers and potentially eliminate the mortgage entirely, particularly if you sell in a high-value suburb.
3Insurance Needs at This Stage
- ✓Review life insurance: if children are independent and mortgage is reducing, coverage may be oversized
- ✓Health insurance becomes more valuable with age; ensure hospital cover is comprehensive
- ✓Income protection: if within 10 years of retirement, assess whether the premium still provides value
- ✓Home and contents: reassess replacement value as children have likely taken significant items
- ✓Consider travel insurance with pre-existing conditions cover for extended overseas travel
4Common Mistakes to Avoid
- ✗Continuing to pay life insurance premiums sized for when children were young and mortgage was large
- ✗Not taking advantage of carry-forward concessional super contribution rules if contributions were low in earlier years
- ✗Downsizing without considering the downsizer contribution scheme and its super benefits
- ✗Redrawing on the mortgage to fund lifestyle expenses, undoing years of extra repayments
- ✗Delaying a rate review because refinancing feels complex, when savings can be $3,000 to $5,000 per year
5Tips for Getting the Best Rates
- 1With a lower LVR from years of repayments, you may qualify for the sharpest rate tiers available
- 2Negotiate directly with your lender: present a competitor rate and ask them to match or beat it
- 3Compare energy plans: without children at home, your usage pattern has changed significantly
- 4Review insurance bundles and remove products that no longer apply to your circumstances
- 5Use our mortgage calculator to model how long until you are mortgage-free at your current extra repayment rate
