Parenthood doesn't always follow a set timeline. Starting a family in your 40s or later—whether naturally, through adoption, fertility treatments or marrying someone with children—brings unique financial concerns. While you may have established a successful career and stable finances, raising children still requires careful budgeting. As an older parent, special financial considerations to keep in mind include purchasing life insurance, ensuring your estate plan is complete and balancing college and retirement savings.
Life insurance is important for any parent. But as you age, it becomes harder to qualify for life insurance, and premiums get higher, even if you're healthy. On average, a 20-year, $1 million term life insurance policy costs $30.71 per month for a 30-year-old man, $112.95 for a 40-year-old man and $283.12 for a 50-year-old man. Get life insurance or adjust your existing coverage ASAP to lock in the lowest premiums.
To determine how much life insurance you need, consider your income, liquid assets, debts and monthly household expenses. At minimum, your insurance payout should cover your family's essential needs. You may also want coverage to pay for extras such as your children's college tuition or weddings.
Term life insurance, the most affordable option, pays out if you die within a certain time frame—usually up to 30 years. Many people buy term life insurance to last until their children are out of college, their mortgage is paid off or their surviving partner can rely on retirement income.
Older parents should consider disability insurance, which replaces a percentage of your income if you can't work due to a short- or long-term disability not caused by work. Disability insurance is a good idea at any age, but especially important for older people, who are generally more vulnerable to illness and injury. Your employer may offer disability insurance, or contact your state's department of insurance to find companies that sell it.
Making—or shoring up—an estate plan lets you control what happens to your children and your property if you die. When you die without an estate plan, your estate typically goes through probate. This can take months, leaving your loved ones without access to your money in the meantime. Key elements of an estate plan include a will, living trust and power of attorney.
Last Will and Testament
A will is the basis of your estate plan. It specifies:
- Your children's guardian and trustee: A guardian takes over raising them, while a trustee manages their money and property. Often, one person handles both roles.
- The executor of your estate: This person oversees paying your debts and taxes and distributes your property to your desired beneficiaries.
- Who inherits your assets: This includes your money and any real assets such as real estate, vehicles or collectibles.
Setting up a living trust is more complicated than making a will but offers some advantages. A trust eliminates probate and provides greater control of how inheritances are distributed. It can also be used to manage your assets should you become incapacitated and helps protect assets from creditors.
Power of Attorney
Designating your health care power of attorney and financial power of attorney should also be part of your estate plan. Financial power of attorney names a trusted person to make decisions about your money and other assets on your behalf. (You can designate this to go into effect only after you become incapacitated.) Health care power of attorney does the same for decisions about your medical care if you're incapacitated.
Parenting may force you to reconsider your retirement plans and keep working to cover expenses like:
With children in the picture, you may need to move to a bigger home or stay in your current home instead of downsizing. A bigger house generally means higher home insurance premiums, a bigger mortgage, higher property taxes and more home maintenance expenses.
Child Care Costs
Unless one parent stays at home, you'll need child care. Average annual child care costs range from $5,357 for home-based care of school age children to $17,171 for infant care in a child care center, according to the Department of Labor.
Tax credits for parents can offset those costs a bit. The child tax credit is up to $2,000 per dependent for the 2022 tax year, depending on income; the Child and Dependent Care Tax Credit is up to $3,000 for one qualifying dependent and $6,000 for two or more. If your employer offers a flexible spending account (FSA) you can use to save money tax-free for qualified child care expenses, take advantage of it.
With average tuition for the 2022-2023 school year ranging from $10,950 for a four-year, in-state school to $39,400 for a four-year private school, concerns about college costs can keep parents of all ages up at night. As an older parent, however, it's important not to sacrifice your retirement savings for your child's college fund.
Aside from parental savings, there are plenty of ways to pay for college, including student loans, scholarships or more affordable schools. But there's no "retirement scholarship" if you prioritize your child's 529 savings plan at the expense of your retirement plan. Your child may be too young to help you financially when you retire—or might have to drop out of college and work to support you.
Try to maximize contributions to your retirement plan. At minimum, chip in enough to earn any employer matching funds. Funding your retirement plan not only protects your future, but might even help your child get more college financial aid. Money in a 529 plan you or your child own is considered an asset on your student's Free Application for Federal Student Aid (FAFSA); money in retirement plans isn't.
Plan to retire before your child starts college? That could help with college costs, too. Income is a factor in calculating the expected family contribution to college costs, but incomes usually drop in requirement, potentially meaning more financial aid. Some retirees even pull up stakes and move to qualify for in-state tuition at their child's desired school.
Your emergency fund should grow with your family—and not just because of your rising expenses. It typically takes older workers longer than younger ones to find jobs after being laid off, and the jobs they find often pay less than their previous work. Just 59% of workers aged 55 to 61 found a job within three years of being laid off; on average, those who found jobs were paid 22% less than before, according to the Urban Institute. If you're laid off before you qualify for Medicare, you'll have to purchase health insurance, which is generally pricier the older you get.
The Bottom Line
To financially prepare for older parenthood, create a budget accounting for your new expenses. Planning for college and impending retirement at the same time can be complicated. Consider consulting a financial advisor who can help you craft a strategy for achieving all of your family's financial goals. While you're at it, let Experian's free credit monitoring service watch your credit for you, so you have more time to savor parenthood.