Ask Mary Adams if she was stricken with "empty nest" feelings after her two sons moved out and she shrugs off the question. After all, the Northern California native says, her boys never strayed far from home after high school, and both worked at one time or another for the family's thriving pool-maintenance business. But listen a little more closely, and her tale of life after child rearing may sound all too familiar.
For Mary and her husband, Rick, the empty-nesting phase began with a few splurges aimed at getting them away from their suburban hustle and bustle. First, they bought a 35-foot RV for tooling around the Golden State on weekends, with their Jeep in tow. A couple of years later, they found a little five-acre ranch getaway not far from Napa Valley. And like a lot of empty nesters, they eventually brought some four-legged "children" into their lives. Only these weren't run-of-the-mill rescue tabbies or finely bred pedigreed pups. The two creatures Mary and Rick bought on an impulse weighed around 250 pounds each, had lanky necks, two-toed feet -- and alluringly long eyelashes. Today the couple's llama herd numbers more than 50, and Mary says they've spent upwards of $500,000 living la vida llama: buying animals, breeding them and showing them competitively at every opportunity. Asked whether raising llamas might ultimately be even more expensive than raising kids, she does the mental math. "Given how many we've got," says the self-described llamaholic, "probably -- yes."
Wait a minute, parents are saying: Can there be anything more expensive than raising kids? The way most Americans figure it, by the time they finally reach their empty-nest years, they've gotten over life's biggest spending hump. After all, the government (conservatively) estimates that for an upper-income family, the cost of raising a single child from birth to age 18 will run about $377,000 -- and that's before the little matter of college tuition. Once the kids have gone, parents often experience (in addition to those well-documented feelings of loss) an exhilarating sense of financial freedom: No more bills for braces and tennis lessons. No extra mouths to feed. No need for the large house and the large mortgage that comes with it. And of course, no six-figure tuition to spend years saving up for and then shelling out. Only it turns out that, at least according to the most recent evidence, when kids go out the door, many parents discover that their days of spending have just begun.
With three of his kids now grown, Don Bartlett has upgraded from model airplanes to the real thing -- for $70,000.
It may sound implausible, but it's true. A study released last year by the Center for Retirement Research at Boston College found that when kids jump ship, parents increase their per capita consumption of nondurable goods by a rather startling proportion: an average of 51 percent. And in this case, "nondurable" can mean a whole laundry list of expenses that were not part of raising a family. That includes things like taking your spouse out to eat without a sullen teenager texting under the table. (Maybe that's why one study says empty nesters can spend up to 50 percent more at restaurants than parents with kids.) Or finally taking a few romantic vacations -- the kind that don't involve water parks. Or indulging in pricey hobbies such as, yes, raising the occasional exotic farm animal. Financial advisers say they see it again and again: Empty-nester clients, after 20-some years of being lashed to the parental-provider mast, take a flying leap into the sea of splurge. Says Kimberly Foss, president of Empyrion Wealth Management in Sacramento, "They're like caged animals gone wild."
To be fair, off-loading the offspring is a momentous life stage for many people. Even many psychologists say a little retail therapy is more than understandable. Parents whose eyes aren't misting up every time they pass their kid's bedroom may find themselves spending out of sheer boredom. (Hello, Home Shopping Network.) The problem, economists point out, is that many of today's empty nesters are also baby boomers, who aren't exactly known for being tightfisted with a dollar. According to a recent study by AARP, some 30 percent of boomers age 50 and older reported some difficulty limiting their spending. No kidding. At last count, the postwar babies were burning through $2.7 trillion a year, a 71 percent jump from what people in the same age group were spending a decade ago.
Of course, excessive spending might have been fine while the American economy was chugging along. But postcrash, experts say, stakes are higher for empty nesters trying to fill the void by living the life of Riley. while giving their nest egg shorter shrift. In an era of economic fragility, when pensions are going the way of the typewriter and social safety nets are sprouting ever-larger holes, financial experts say that few in the postkid phase -- and few baby boomers in general -- can afford to continue indulging in the kind of magical thinking that has long led them to finance now, save later and hope like hell they don't get sick, get canned or live to 100.
Indeed, to say that the boomer generation is unprepared for retirement is an understatement: In its most recent Retirement Confidence Survey, the nonprofit Employee Benefit Research Institute reported that just over half of workers ages 45 to 54 claim savings and investments of less than $25,000 (before pension, social security or home equity), up from a third in 2007. And compared with their thriftier parents, says George Moschis, director of the Center for Mature Consumer Studies at Georgia State University, the typical boomer has only 10 to 15 percent as many assets -- and far more debt. To be sure, the crash and credit crunch brought these realities into sharper focus, inducing many Americans to save more, pay down debt and curb their more wanton spending. And the nerve-rattling turmoil in the market this summer drove that message home. Still, says Scott Hanson, cofounder of a California-based independent advisory firm with $1.3 billion under management, the empty-nester phase can represent a real pitfall, when the combination of pent-up demand and newfound discretionary cash can keep a boomer from realizing that this is the last, best opportunity to double down on nest egg savings. "It's an interesting generation," says Hanson. "They want their last retirement check to bounce."
Mary Adams (with one of her therapy llamas) and her husband cashed out their IRAs to fund their "alternative livestock."
No one keeps an exact tally of the number of people in the empty-nester group. The Census Bureau can tell you there are 33 million married couples without children under 18, but that includes couples who haven't yet produced or adopted offspring, as well as those who never did and never will. Still, experts say the majority of that number falls squarely into the "had kids, now they're launched" category. In fact, as America's population ages, households with children have become the minority, making up only 22 percent of the total, as the empty nesters' ranks continue to swell. Given these population shifts, corporate America has begun to take notice, studying the so-called silver tsunami with the help of a smattering of consumer-marketing firms that focus on folks who've wrapped up their child rearing. In one TV spot, convenience-food company Buitoni pitches candlelight dinners of prepackaged pasta to alone-again couples seeking romance. In another, online-payment company eBillme encourages surfing for big-ticket purchases as an antidote to the empty-nester blues: Try a new mattress for lazy mornings, the ad suggests, "now that you don't have to wake up and rouse the kids."
Not that the empty-nester reality is all sleeping in and lovey-dovey linguine. Behind the advertising generalities lies a fair amount of complexity -- and financial burden -- says boomer-marketing specialist Mary Furlong, a professor of entrepreneurship at Santa Clara University. For one thing, Americans over 50 have seen their divorce rate nearly double from 1990 to 2009 -- with many splits coming after the kids have gone. Then there's the growing "sandwich" phenomenon, which refills the nest with aging parents, boomerang kids or both. And even if they're not moving in and raiding the fridge again, the kids may still have their hands thrust deeply into Mom and Dad's retirement pockets. Roughly 40 percent each of Gen X and Gen Y have received financial support from their parents after college, according to a recent study by TD Ameritrade, while 25 percent of Gen Y report their folks are paying for discretionary items like cell phone bills, insurance and car expenses. "There's this whole 'we're waiting for the kids to get their feet underneath them' mentality," says Lori Bitter, CEO of boomer-marketing firm Continuum Crew.
But waiting for them to score a salary-with-benefits gig in this harsh job market can get expensive -- a burden advisers say they see all the time. Gary Gilgen, director of financial planning for the Michigan-based wealth-advisory firm Rehmann Financial, says he has a pair of clients who, while living off their pensions (his from the auto industry, hers from teaching), are continuing to support their 30-something actor son as he chases movie-star dreams in Los Angeles. Monthly outlay for the wannabe Brad Pitt? Twelve thousand dollars. The parents know it's wrong, and they don't know how to stop it, says Gilgen, who points out that, for years, they've missed out on the empty nest's greatest financial advantage: the ability to cut expenses. "You have to shut the feed trough off," he says.
Yet even when the kids have successfully made the leap to supporting themselves, some empty nesters still find it hard to rein in the spending -- downturn be damned. Michael Edwards, for one, can rattle off many of the costs of diving into some culinary adventures after his vegan daughter, Hillary, left for college: The Washington, D.C. based professor and single dad shipped himself off to three cooking boot camps at the Culinary Institute of America ($2,200 a pop, plus hotel and transportation costs) and two multimonth advanced programs at L'Academie de Cuisine (up to $2,000 each) and took private lessons from renowned chefs (roughly $100 each). Harder to tally, though, is the cost of all the high-end kitchen gear that's accumulated recently in his drawers and cabinets, like the 40-some task-specific pots and pans and the 30-plus professional-grade knives. ("I never thought I'd ever pay $200 for a knife, much less $700," says the passionate cook.) As for nice meals out in "serious" restaurants? Too many to count, he says.
Indeed, experts say boomers tend to overachieve in their hobbies the same way they do in their careers. But while passionate pursuits and wellness activities like yoga and triathlons can help fill all those gaping weekends once spent shuttling kids to soccer games, empty nesters also don't mind easing their downward-dog exertions with a dollop of luxury. At the Como Shambhala at Parrot Cay in Turks and Caicos, for example, yoga vacations can run as high as $10,000 a week per couple for instruction by "visiting masters," an ocean-view room and, fans say, an "utterly medicinal" ginger tea.
But why go away when there are plenty of things to splurge on right in that suddenly more spacious home? After all, empty-nesting is a natural time to begin the dream-retirement-home project, whether by remodeling existing digs (think outdoor kitchens and spare-room conversions) or working with an architect or builder from scratch. Research by Harvard's Joint Center for Housing Studies shows that boomers as a group drop more than double what Gen Xers do on remodeling and more than four times what every other age group spends. As for the so-called active-adult new-home market, average values have rebounded past 2005 levels, with some builders reporting solid postcrash growth: At Robson Resort Communities, which has upscale active-adult developments in Texas and Arizona, sales rose 16 percent from 2008 to 2010.
But the downturn did make a big difference in how 55-plus households finance their dream digs, according to a recent study by the MetLife Mature Market Institute and the National Association of Home Builders. With the overall housing market still depressed, buyers can't count on parlaying an existing family home into cash to pay for a new one. As a result, they're pulling down payments more frequently from savings and cash on hand -- and in the process, often depleting retirement reserves. Indeed, only 55 percent of the active-adult homebuyers who made a down payment in 2009 reported that the money came from the sale of a previous home, down from 92 percent in 2007.
Selling the family home in Elk Horn, Neb., wasn't a problem for Tom and Janelle Roth, who say they got close to their asking price of $236,500. That money paid for some of their new three-bedroom at Robson Ranch, a 1,300-home, country club style community in Denton, Texas; the rest they financed with savings. Tom, a banking-industry consultant, says that after happily sacrificing for their two boys -- both emotionally and financially -- now it was time for them. So the couple, both 59, didn't hold back. They maxed out on builder upgrades like the extended patio and bay window, chose the highest-end finishes, like granite counters and heavy glass shower doors, and installed niceties like a 60-bottle wine fridge -- ultimately tacking on more than $100,000 in extras to their $332,000 home purchase. Tom splurged on a 65-inch, 3-D flat-screen TV for the living area and a 55-incher for the bedroom. And for the first time ever, they hired a decorator ($50,000, including furniture) to design their kid-free living space. ("You wouldn't want teenage boys putting their feet up on the glass coffee table," Janelle says.) Next up? Custom cabinets for Tom's home office. The Roths are thrilled with the house, the community's resortlike amenities and all their new friends, but they joke that they don't like to think too much about the exact cost of it all. Tom, who works entirely on commission, says the past few years "haven't been so sporty" in his industry and that the crash took half the couple's retirement savings. "I'm going to be working a little longer," he says.
Join the crowd, Tom. To help pay for all the empty-nest expenses, four in 10 U.S. workers surveyed by professional-services firm Towers Watson last year reported that, since the crash, they'll be toiling a few years longer than they had originally planned. But more empty nesters, whether downsized and in need of a job or just fed up and hankering to be their own boss, are hanging out a shingle. According to the Kauffman Index of Entrepreneurial Activity, 45- to 54-year-olds accounted for a quarter of all start-ups in 2010, while 55- to 64-year-olds made up 23 percent, up from 15 percent in 1996. "Contrary to the popular opinion that entrepreneurship is a young people's game," says Scott Shane, a professor of economics at Case Western Reserve University, "it increases as people get older."
That's the time, Shane says, when people often have the experience and capital to get things rolling. But while experts say many boomer second acts these days come in the form of consultancies that leverage their knowledge and existing business network, Steve King, a partner in small-business research firm Emergent, says there's also a growing trend of "hobbypreneurship," which involves trying to parlay a passionate pursuit -- like, say, jewelry making -- into a profit-making venture that also gives them a new "baby" to nurture. Indeed, the caretaking impulse inspired empty-nester sisters Cathy Wiley and E.Ann Ingram, of Columbia, Tenn., to try to turn their postkids Havanese-puppy purchases into a breeding business. Ingram says she especially loves grooming, a carryover from her daughter's beauty pageant days. "It's comforting," she says.
But such ventures, King says, can be hard to pull off, sometimes becoming a feel-good money pit -- at a stage of life when there's less time to make up any losses. (Think constant travel to dog shows and cabinets crammed with grooming products.) For Stacy Klaus, the passion play involved knitting needles and fuzzy yarn. After her daughter's departure for college put her in a "tailspin" and her husband sold his insurance business, the Austin, Texas based couple decided it was finally time for her to go to her happy place -- and open a knitting shop. After burning through a $100,000 line of credit, she says, The Knitting Nest remains in the red, and the once free-spending couple have even had to dip into their retirement stash. "It's hard to go from the person who didn't have to worry about money at all," says Klaus, "to 'Oh, gosh, we can't.'"
Empty nester Don Bartlett of Tracy, Calif., isn't worried about cash flow; his corporate-car-fleet repair business is doing very well, he says. But that didn't stop his wife from fretting about their financial future the day he came home and announced he was bumping up his little flying pastime to a new altitude and dropping $70,000 on a four-seat propeller plane. Sure, the hobby's not exactly cheap: Fuel alone runs "a couple grand" a month, while the monthly hangar rental costs $400. But the lifelong mechanic, who's a father of three grown boys, says he spent a lot of time at their high school football games wondering, Dang, when is it going to be my turn? and that he's enjoying every minute he takes to the skies. And though the time he spends aloft is mostly recreational, he says he does occasionally use the plane for work -- and is hoping to write off some of the costs.
Not a bad idea if he can pull it off, say financial experts. Because even if you're feeling flush -- and professionals say that's not the first word most clients are using to describe the way they feel these days -- the crash of 2008 was a wake-up call to a more mindful way of spending. Tom Weilert, a Dallas-based adviser with Northwestern Mutual, says the mind-set of his clientele, the majority of whom range in age from 52 to 62, has changed since then: They're reevaluating "their jobs, their future and their investment returns." Maybe that's why American workers seem to be getting more aggressive about saving; Fidelity reported that the average balance in its 401(k) plans rose to $75,000 at the end of the first quarter of 2011, up nearly 12 percent from a year prior and 58 percent from the same period in 2009.
The corresponding counsel from financial advisers should come as no surprise -- to those who want to listen: Sit down and make a retirement plan. Save for splurges. And, says Kevin Kautzmann, a New York based financial planner, pay down debt first; it's probably baby boomers' biggest bugaboo. It's not that experts want us all to keep our nose to the grindstone without a break and live like monks. After all, having successfully launched kids into this world is no mean feat, and having the time and resources to pursue one's passions is among the great rewards of the postkid phase. But pros say they see too many people upping their standard of living in the early empty-nest phase, only to sacrifice it later in retirement. "I'm just making sure people have the right kind of balance between today and tomorrow," says Hanson, the California adviser.
Back in Llamaville, Mary and Rick Adams are still working on that balance. (Recent budgetary moves: They've sold a few animals and begun monetizing their manure for compost.) But sitting in the sunroom of her ranch not far from the Nevada border, Mary sighs contentedly as she looks out over the light-dappled pasture, watching her "magical" llamas graze under the pine trees while the babies bask in the warm grass nearby. She waxes on about her new, llama-centered life: bringing them to nursing homes as "therapy" animals, socializing with the community of breeders and enthusiasts, and the first time she found herself elbow-deep in a pregnant dam, turning a poorly positioned 26-pound baby. (It's a good thing she'd just given up fake fingernails, she says.) Of course, she laughs a little nervously as she mentions they cashed out their 401(k)s and IRAs to help fund their self-professed addiction -- and that prices for these "alternative livestock" have dropped so far over the past few years. It's pretty much their nest egg, Mary says. "People think we're crazy." But then she brightens, adding: "Hey, if you have a bad day, you can go out and hug the animals."
Additional reporting by Linda Lacinaand David Montalvo.