4 Key Differences in Financial Planning for Childless

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“My defining moment was realizing I only had money for me, seeing the people around me having children without the resources to take care of them,” TikTokerstephaniechiloa said when asked why she decided not to have children. She is one of the millions of people who are part of the No Children movement.

Childless people actively choose not to have children, sometimes for financial reasons, but mostly because they think this is not the right lifestyle for them. The r/childfree Reddit thread has 1.4 million members who conduct annual demographic surveys. Their own research shows that 73% of survey respondents are female, while 76% are Millennials and Generation Zers between the ages of 19 and 34.

The videos tagged with #childfree TikTok have collectively garnered 212 million views, with creators ranging from young women advocating their choices not to have children, to women 50 and over sharing how happy they are that they chose not to have children.

“Most financial planning is built around starting a family, which means that a child-free society is very underserved,” says financial planner Jay Zygmont, Ph.D., CFP, who specializes in child-free wealth management.

Here are four major financial planning differences that individuals and childless couples should consider.

1. Tax implications of retirement savings and estate planning

Zygmont points out that most retirement savings funds are built so that you can pass that money on to future generations. “In 2022, you can gift a property worth up to $12.06 million without any tax impact,” he says. “Many people will keep unrealized gains in their 401(k) and other real estate components to pass on to the next generation.”

An unrealized gain is the value that has accumulated on an investment, such as a bond or gold, since the initial investment. The way real estate components like 401(k) accounts are set up allows the next generation to access that money without taxing.

“Many individuals who are not dependent on children plan to either spend all of this or give their possessions to charity,” Zygmont says. Charitable donations will exempt you from taxes, but if you plan to spend money on your estate before you die, you will have to pay taxes on unrealized gains for the rest of your life.

Zigmont suggests working with a retirement and real estate planner who understands the child-free lifestyle so you can avoid fees and taxes by keeping your money outside of traditional 401(k) or IRA accounts.

2. Whether you need life insurance

“What is the point of getting life insurance if no one is counting on you to leave the money for them?” Zygmont says. Some people choose to leave a life insurance policy with their spouse as a beneficiary, while others who Zigmont worked with choose not to have a life insurance policy at all.

This does not mean that being childless means that you do not automatically need life insurance. Small business owners without children may need life insurance to cover any costs your business may incur as a result of your disability or death. If you don’t have children and have private student loans, you may need a life insurance policy to ensure that no family members who signed on to the debt left debts after your death. Or, if you have a partner who depends on your income, a life insurance policy may help them pay the bills on their own.

But if you don’t have children and you have other plans for dealing with these situations, you may want to consider reallocating life insurance money to the things you are passionate about in the present or saving for future health care expenses.

3. How much will you save for more health care later in life

One of the biggest questions the non-kids community faces is: Who will take care of you when you grow up? Since Zygmont and his wife had no children either, he replied, “Well, I I will take care of myself by choosing the best healthcare plan, and saving for the extra costs. “People without children may need to provide for home health care costs, subsidized living facilities, and funeral costs later in life.

Zigmont recommends that childless people work with a financial planner to find the best type of savings plan for their future health care savings goals.

4. Choose a healthcare agent before you need it

“Hospitals are at a loss when you don’t have children to make decisions for you,” Zygmont says. You will need to choose a trustworthy friend to act as your health care agent when you are sick. A health care agent, or health care power of attorney, is someone who makes health care decisions for you. Health care proxy forms vary from state to state, with some states requiring a notary, attorney, or witnesses.

It’s not just casual talk, but you should sit down and discuss your preferences with them so that they can make the best medical and financial decisions for you if you get sick.