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When children
depart, it’s time to
evaluate holdings

IF your children are grown and out of the house, you may have some adjustments to make in your life -- especially in the way you save and invest. By taking the right steps, you can use your new "empty nest" status as an opportunity to help speed your progress toward some of important financial goals.

Which types of financial moves should you make at this stage of your life? You could, of course, immediately get on eBay and sell all the possessions your children have left behind, but that could lead to a few awkward moments at your next family gathering. Instead, consider these suggestions:

» Assess your level of disposable income: If your children have left home for college, you obviously may be incurring some big expenses. But if they're done with school, and truly out on their own, you might find yourself with some additional disposable income. Try to estimate about how much more money you now have each month.

» Pay down debts: Assuming you have freed some income, you may want to use some of it to pay off some debts, especially if you have high-rate credit cards. The lower your debt payments, the more you'll have available to invest.

» Build your retirement savings: The departure of your grown children may well coincide with some of the highest earning years of your life. If so, you may have the means to significantly increase the amount of money you put away for retirement. If you haven't already maxed out on your IRA and 401(k), now may be the time to do so. And if you are already putting in the maximum to these tax-advantaged plans, consider investing in a fixed annuity, which offers tax-deferred earnings and allows you to contribute virtually as much as you want.

» Review your investment mix: Once you are through paying for college, you may want to scrutinize your investment mix to see if it still meets your needs. You might want to consider rebalancing your portfolio and taking a somewhat more conservative approach to investing, especially in the years immediately preceding your retirement. However, keep in mind that you will still need to diversify your holdings; and even when you retire, you'll need to have some growth-oriented vehicles in your portfolio.

» Consider buying a smaller house: If you are living in a big house, and you no longer need all that space, you might want to consider downsizing your living arrangements. As long as you've owned and lived in your home for at least two years within the five years preceding its sale, you may be able to exclude up to $250,000 in capital gains, or $500,000 if you're married and filing a joint return. (See your tax adviser for the numbers that apply to your individual situation.) So, if you buy a smaller home, you could pocket a tidy sum, which you can then use for your retirement or to fulfill some long-held dreams of traveling.

You may find it a bittersweet experience when your children grow up and leave home for good. Yet you may discover that your empty nest may be full of opportunities for you to build your financial security.