I had a number of childfree people in my practice, and a lot of my friends are childfree, so I decided to spend some time this month focusing on planning considerations for these folks.
First, let me acknowledge that childfree and childless are NOT the same thing. Here are some quick definitions:
The US Census considers someone childless when they don’t have biological children of their own. According to Pew Research Center, more and more adults (aged 18 – 49) who aren’t biological parents say they’re unlikely to ever have kids. And according to the U.S. Census, 16.5% of adults aged 55 and older are childless. But we can further categorize childless people as follows:
1. By choice (sometimes called childfree): these folks don’t have any biological kids, and don’t plan to. It can be difficult to tease out how many people are childfree rather than childless, but by one estimate it’s 11% of the U.S. population 55 and over. That figure may be even higher for younger people. These people will plan without kids in mind.
2. Not by choice: these people want kids but either can’t have them (for medical reasons, etc.) or just haven’t had the opportunity (because of relationships, funding, etc.). Depending on their circumstances and the permanency of their situation, these people might plan as if they will have kids OR as if they won’t. If you want children and can’t or don’t have them for whatever reason, I see you.
It can be hard to tease these categories apart, and of course things can change over time. For example, some childfree individuals (like me) have adult stepchildren, or younger stepchildren who don’t live with them. I don’t plan 100% like a person who has a kid, but I don’t plan 100% like a childfree person, either. Each situation is unique.
But let’s focus on planning for people who are childfree, meaning that they don’t have any kids (biological, step, adopted, or otherwise) and don’t plan to have any in the future. What are the considerations when you’re childfree?
1. Financial life goals: as you might imagine, being childfree has a huge impact on the goals you set in your financial life. You won’t have child-related goals, so what ARE your goals? Do you want to stop working early? Keep working a little forever, but from all over the world? Live with your besties if your partner dies before you? Spend all your money before you die and enjoy the heck out of it? The world is your oyster, and you get to decide what’s in it.
2. Income: according to the US Department of Agriculture (in 2017), the average cost to raise a kid until they turn 18 is $233,610. We all know it doesn’t end there, but it’s a good starting point. Let’s just say childfree people may have more disposable income, so they will need to decide what they want to do with it. They may need to spend more money in some of the areas below, but they might also decide to allocate more money to travel, savings, supporting causes they care about, or whatever else brings them joy and satisfaction along the way.
3. Life insurance: in general, people need life insurance when there are other people depending on them for their income. Some people also keep life insurance policies so they can leave a legacy for their children. Without kids, the need for life insurance and/or the amount needed may be reduced. But you might still need some life insurance if you have a partner, friend, or family member counting on you for income.
4. Long-term disability (LTD) insurance: this coverage pays you a set amount of money every month if you’re still unable to work after the first 90 days of a disability. The need for LTD coverage may not go down if you’re childfree, but the amount of coverage you need might be lower; it just depends on how much you spend every month. You can read more about LTD here.
5. Long-term care (LTC) insurance: this covers you if you have a chronic health condition and need help taking care of yourself. Childless people may feel a bit more stress about long-term care situations, since they don’t have kids to take care of them if they become frail. This is not to say everyone’s kids will take care of them if they become frail, but when you don’t have kids, your non-kids definitely won't be taking care of you. Make sure you have a plan to cover increasing care costs as you age. Read more in another blog post here.
6. Caring for aging parents or other family members: whether it’s fair or not, the sibling who doesn’t have kids is often expected to take care of aging parents or other relatives. Family members might just assume the childfree person has the extra funds and/or bandwidth to take care of these folks. If that’s OK with you, great! If not, it’s time to have discussions with the family, set boundaries ahead of time, and make sure those aging family members have LTC insurance or some other plan for how and where they will get care as they age.
7. Estate planning: childfree people might make different decisions about what and how much they want to leave to whom. They don’t have kids, but they might have partners, friends, pets, family members, and/or charitable causes they want to support. They might also adopt the “die with $0” approach I mentioned earlier. It’s important to be clear about your goals here, to make sure you design an estate plan to support them. Here’s what you need and why:
a. End-of-life planning: what do you want to happen to your body when you die? If you have a terminal condition, do you want the option of euthanasia? What about your pets? Your beloved people? You’ll need to make sure you set aside enough money to pay for what you want at and near the end of your life.
b. Will: yes, you need one. A will is your legal expression of what you want to be done and how to dispose of your property when you die. You’ll want to name a primary and secondary executor of your will, so you have a backup person in case your first choice can’t or won’t serve.
c. Beneficiary designations and Transfer on Death (TOD) accounts: be aware that your beneficiary designations on accounts and life insurance will trump whatever is written in your will. If you forget to remove your ex as beneficiary of your 401(k) and your will leaves everything to your best friend, Pooky, guess who’s getting the 401(k) proceeds? Yep, your ex. The same thing goes for TOD accounts; on some bank accounts you can designate a person to receive the funds from that account when you die, and this trumps your will, too. But a TOD account can be a good way to leave your partner and/or executor funds to pay for a funeral, for example, so they don’t have to wait for life insurance or probate to spend some of your assets.
d. Healthcare Directive (aka Living Will): this tells emergency medical services, hospitals, and doctors what you want done in certain health-related situations. For example, you can specify whether you want to be resuscitated, and whether you want life support or intravenous feeding. If you don’t have this document or a readily available next-of-kin, your medical professionals will decide for you. You may not like what they decide.
e. Healthcare Power of Attorney (POA): this document designates someone to make healthcare decisions if you’re not able to make them yourself. You might not want your next of kin to make these decisions, so get your wishes in writing now. If you are part of a couple or group but are not legally married, it’s even more critical to get a Healthcare POA in place. If you don’t, our legal and medical institutions consider your beloved posse to be mere friends of yours, with no say in what happens to you.
f. Legal POA: this document designates someone to make legal, financial, and other decisions if you’re not able to make them yourself. You could name the same person as for your Healthcare POA, but you don’t have to.
g. When I Die file: pull together all of your estate documentation, plus all the passwords for your online accounts and devices, and make sure that file is available to your executors. There are lots of books and workbooks out there to help you do this thoroughly, and to help you decide how you want to do it. The authors behind A Beginner’s Guide to the End also have a list of resources to help people manage a broad range of considerations before and after a death.
“But Penny,” you might say, “I don’t have anyone I can trust to be an executor, POA, or TOD account holder for me.” Or maybe you just don’t want this burden to fall on your loved ones when you die. If this is your situation, you can pay a professional trustee to do these functions for you. You’ll pay them a fee to be available if something happens to you, and of course they will execute your wishes when you die. Just be sure to hire a fiduciary, which means, by law, they have to put your interests first when making decisions for you.
And for those of you who are childfree and single: you carry the entire responsibility yourself, as you well know. I salute you, you trailblazing adventurer! You have the freedom, and maybe you also feel a bit of the fear. Get yourself a fabulous Financial Life Planner and get your affairs in order. Now is the time.
And for all of you childfree folks, I see you being disrespected and dismissed (particularly you women). For what it’s worth, I admire your chutzpah and strength in choosing your own path. I wish you all the best as you plan for and live the life you want.