4 ways childfree people should plan differently with their money, according an an expert who knows

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• People who are childfree choose not to have children, and they have different financial planning needs.
• Childfree wealth specialist Jay Zigmont says childfree people are “underserved” by most financial planners.
• If you’re childfree, you’ll have to plan differently for retirement, life insurance, and healthcare.
• Vanguard Personal Advisor Services

“My defining moment was realizing I only had money for me, and seeing people around me having children without the resources to take care of them,” said TikToker @stephaniechiloa when she was asked why she decided she never wanted to have kids. She’s one of millions of people who are a part of the childfree movement.

Childfree people actively choose not to have children, sometimes because of financial reasons, but mostly because they believe it’s not the right lifestyle for them. The r/childfree Reddit thread has 1.4 million members who conduct annual demographic surveys. Their self-conducted research shows that 73% of respondents to the survey identify as female, while 76% are millennials and Gen Zers ages 19-34.

Videos tagged with #childfree TikTok have collectively earned 212 million views, with creators ranging from young women defending their choices not to have children, to women 50 and up sharing how happy they are with their choice to be childfree. 

“Most financial planning is built around having a family, which means the childfree community is vastly underserved,” says financial planner Jay Zigmont, Ph.D., CFP, who specializes in childfree wealth management.

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

1. The tax implications of retirement savings and estate planning

Zigmont 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 an estate up to $12.06 million with no tax impact,” he says. “Many people will keep unrealized gains in their 401(k) and other estate components to pass to the next generation.”

Unrealized gains are the value that an investment, like bonds or gold, have accrued since the initial investment. The way estate components like 401(k) accounts are set up allows the next generation to access those funds without being taxed.

“Many childfree individuals are planning on either spending it all, or giving their estate to charities,” Zigmont says. Charitable donations would relieve you of taxes, but if you’re planning on spending the money in your estate before you die, you’ll have to pay taxes on unrealized gains for the rest of your life.

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

2. Whether you need life insurance

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

This isn’t to say being childfree means you automatically don’t need life insurance. Childfree small business owners might still need life insurance to cover any costs your business might incur as a result of your disability or death. If you’re childfree with private student loans, you might need a life insurance policy to make sure any family members who cosigned the debt are not left with debt after you die. Or, if you have a partner who relies on your income, a life insurance policy may help them pay the bills alone.

But if you’re childfree and have other plans to handle these situations, you may want to consider reallocating your life insurance funds to to the things you’re passionate about in the present moment or to save for future healthcare expenses.

3. How much to save for bigger healthcare costs later in life

One of the biggest questions that the childfree community faces is: Who’s going to take care of you when you’re older? As Zigmont and his wife are also childfree, he answers, “Well, I’m going to take care of myself by choosing the best healthcare plan, and saving up for extra costs.” Childfree people may need to save up for at-home healthcare, assisted living facilities, and funeral costs later in life.

Zigmont recommends that childfree people work with a financial planner to find the best kind of savings plan to meet their healthcare savings goals down the line.

4. Choosing a healthcare proxy before you need one

“Hospitals are confused when you don’t have kids to make decisions for you,” Zigmont says. You’ll need to choose a trustworthy friend to act as your healthcare proxy when you’re sick. A healthcare proxy, or a power of attorney for healthcare, is a person who makes healthcare decisions on your behalf. Healthcare proxy forms vary from state to state, with some states requiring a notary, lawyer, or witnesses.

It’s not exactly casual brunch talk, but you should sit and discuss your preferences with them so they can make the best medical and financial decisions on your behalf if you get sick.