Paying off a mortgage or settling tuition payments for children’s education are two of the most significant expenditures for most families and making that final payment can make available significant funds. Even if only one parent contributes $19,000 – the limit before triggering gift tax implications – to a 529 plan (the single maximum in 2025), and has a $2,000 mortgage, that's $43,000 annually or about $3,500 monthly that can be reallocated to other initiatives.

Financial advisors must encourage clients to explore new avenues for this windfall so they can avoid consuming it in daily spending, which is easy to do.

Many people have the best intentions to save, but often it doesn’t happen. A 2022 study from the Center for Retirement Research of Boston College suggests that once kids leave home, parents consume less but don’t save more.¹

Clients who have successfully put their children through college or paid off their mortgage – or both – deserve congratulations for accomplishing these financial milestones. This is a moment of pride and a testament to their financial discipline. However, once the celebration is done, it’s time for them to reassess their budget and find ways to put that money to good use. This new focus can include reducing high-interest debt, saving more, or building cash reserves. At the same time, advisors can tap into technology such as CRM platforms to help keep clients on their financial path.

How to Get Started
Advisors should help clients develop a concrete plan to allocate this freed-up cash flow.

Depending on a client’s needs, there are four areas to shore up ahead of retirement:

1. Pay down variable and high-interest debt: High-interest debt includes outstanding credit-card balances, pricey car loans, lines of credit, or other debt, according to Money Coaches Canada.² A Barron’s article defines high-interest debt as having an interest rate above 10%.³

2. Increase long-term savings: If clients haven’t maximized their workplace retirement accounts, now is the time. The U.S. Internal Revenue Service reports the 2025 contribution limit for 401(k) and 403(b) accounts is $23,500.⁴ The IRA limit remains at $7,000. For those who already have maxed out their tax-advantage savings accounts, clients over 50 can increase their savings with a $7,500 catch-up contribution, bringing their total savings to $31,000. The IRS also notes that a new provision under the SECURE 2.0 Act of 2022 allows for a higher catch-up limit for employees aged 60-63, which permits them to save up to $11,250, rather than $7,500, according to PLANSPONSOR.

   
   Clients who have maxed out 401(k) and IRAs should consider putting money in a Health Savings Account (HSA) if they have a high-deductible health insurance plan. According to the IRS, the HSA contribution limits for 2025 are $4,300 for a single-payer and $8,550 for family coverage. People older than 55 can contribute an additional $1,000 as a catch-up contribution.
   

   Fidelity states that even for people on track with their retirement savings, putting money in an HSA account or leveraging catch-up contributions in a 401(k) is helpful. According to its recent survey, the asset manager reports that 43% of retirees say it’s one of the most significant steps to take as savers near retirement.⁵

3. Build up cash reserves: With a sizable windfall, it shouldn’t take long to build up a cash cushion to deal with volatile markets, according to Money Coaches Canada.

   
   For clients who plan to stay in their homes or near-retirees who want to age in place, creating a fund for home-maintenance repairs could allow clients to amass savings for later use when they need to pay for big-ticket items, such as a new roof, without it affecting their main cash flow, according to Chase.⁶

4. Leverage Technology: For financial advisors with clients who want to take advantage of these opportunities, technology plays a critical role. By using a CRM built for wealth management and integrated with their core tech stack, advisors can deliver a clearer view of client net worth to support account aggregation and financial planning. Greater visibility into cash flow and the ability to model various scenarios enable advisors to better prepare financial plans for these clients. Finally, the right client-centric technology with accurate client data helps advisors plan critical conversations when clients need it the most.
   

Allocating Cash
Barron’s suggests that a client’s needs, age, and retirement timeline can affect allocating this extra cash. Some clients may choose just one, or a combination of the funding ideas.

For clients between 50 and 60 who want to spread their funds across these goals, they should allocate half of the windfall to retirement savings.

After funding savings, clients aged 50 to 55 should earmark 10% to 25% to pay down variable debt and 10% to 25% for home maintenance savings. For clients aged 55 to 60 who want to retire within 10 years, financial advisors can fine-tune this breakdown to spread out 50% of the cash between debt, home maintenance, and long-term care savings, depending on a client’s needs.

Once clients reach 60 to 65, they may want to concentrate on using the freed-up funds to increase their cash cushion and contribute to long-term savings, earmarking between 25% and 50% as needed.

Any extra money can go toward debt reduction or purchasing big-ticket items before retirement.

Advisors play a crucial role in guiding clients who’ve paid off mortgages and tuition toward reducing debt, boosting savings, and building cash reserves for retirement. Their expertise and guidance are invaluable in this process, especially when supported by the right technology to enhance their efforts.

Ready to see how SS&C Black Diamond^® Wealth Solutions can help your firm scale smarter, serve clients better, and grow with confidence? Request a personalized demo, call 1-800-727-0605, or email info@sscblackdiamond.com today.

¹Do Households Save More When the Kids Leave? Take Two, Center for Retirement Research at Boston College, March 2022
²What to Do With Your Money After Paying off the Mortgage, Money Coaches Canada, May 14, 2024
³Paid Off College and the Mortgage? What to Do With the Extra Cash, Barron’s, July 9, 2022
⁴401(k) limit increases to $23,500 for 2025, IRA limit remains $7,000, Internal Revenue Service, Nov. 1, 2024
⁵Fidelity Investments Research: 2025 State of Retirement Planning Study, Fidelity Investments, March 11, 2025
⁶A Look at Life After Your Mortgage is Paid Off, Chase, undated