These days, many young people feel like saving for retirement is a pipe dream. You may live paycheck-to-paycheck, struggle to maintain employment, and/or have really high expenses to pay right now. In any case, trying to build your nest egg takes a backseat to more immediate financial concerns. As a result, the vast majority of people in the workforce right now are not well-prepared for their retirement years.
Fortunately, it’s not all bad news. Even if you don’t have a high-paying job and you can’t see a way to save money, there are solutions for you. So, in today’s post, we are going to look at 4 ways to build your nest egg and get started with your retirement savings!
What does building a nest egg mean?
Basically, building a nest egg just means saving and investing money into assets that serve a specific purpose. Today, we’re talking about saving money for retirement.
But, you could also build one for certain expenses like medical costs, college funds, or even save for a home or car. The choices are endless. The key is to have a separate account that you can throw this money into.
This will depend on you and what you want out of your retirement.
- Do you want to live in luxury?
- Are you going to live in the US or overseas in a lower cost of living area?
- Will you own or rent your home?
These are all questions you should be asking yourself before deciding how much you’ll need in retirement.
However, keep in mind that these goals may change too. So of course, you can always save and invest more or less depending on what’s happening in your life currently.
As an example, my husband and I never plan on owning a home until we retire (because we want to live overseas and buy a home then). Because of this, we’re building a slightly bigger nest egg so we could afford a home in cash!
How much is a good nest egg?
How big should your nest egg be? What’s considered a good nest egg?
There is no such thing as a “good” or “bad” nest egg. However, the average net worth for those who are in retirement age (aka 65 and above) is pretty much $1 million.
- Do you think you could retire with a million dollars?
- Do you think you’ll need more or less?
- When do you plan on retiring?
- How far from now is that?
While a good nest egg is one that can support you in retirement, you may want to ask those questions to see if you’ll need more or less of the average.
Should you invest your nest egg?
Ok, so you need a nest egg…and it’s good to have a large one. But, should you invest your nest egg?
Unless you’re saving for short-term goals (like buying a car or renovating a room in your house, etc), you shouldn’t be saving your nest egg in a savings account.
You could invest in multiple options too.
Many people qualify for both a 401(k) and a Roth IRA. So even if you meet the max contributions for one, you can start investing your nest egg in another! But, you want your money to grow and gain interest, and you can’t do that with a regular savings account.
How do I protect my nest egg in retirement?
It’s actually easier than you think to protect your nest egg. Basically, listen to the experts.
- Plan for the major expenses,
- make sure you’ve got healthcare, disability, and long-term care figured out, and…
- continue to reinvest where and when you can.
While you’ll be able to sit back and relax much more in retirement, you don’t want to go through your funds too quickly. So keep an eye on your investments and be sure to talk with a financial advisor if you need more guidance.
Can I start saving for retirement at 60?
Let’s say you’re a little late to the investment party… Can you start saving for retirement at 60?
You can certainly build your nest egg after 60. Of course, financial gurus always say “the earlier the better” and that’s true for the most part.
When you give your money plenty of time to grow, you can take advantage of compound interest. It’s easier to save $1 million when you start at 20 vs. 60.
However, this doesn’t mean it’s impossible to save for retirement after a certain age. And, in many cases, you can even take advantage of extra savings.
Now, I will say that you’ll want to save significantly more than a 20-year-old. Because you have some catching up to do, your focus should be throwing the majority of your money and income into investing.
Don’t take super high-risk investments either, because you’d hate to lose money right before retirement. Instead, find a balanced portfolio (think 60%-70% stocks, 30%-40% bonds) that will help you save money faster with your limited time.
After you save up a bunch of money, the next logical question you’ll be asking yourself is, “How long will my money last?”…
Again, this will all depend on how much you build in your nest egg, and what your life is like after retirement.
If you start spending more than you ever have before, it might run out faster than you think. But if you can keep expenses low, and still love comfortably, you could stretch your nest egg for years.
Not sure how long your retirement savings would last? There are handy calculators that can help you figure it out.
Strategies To Build Your Nest Egg
Okay, now you know all about nest eggs, what they are, and if it’s the right choice for you. Now let’s talk about how to actually build your nest egg so you can retire on your own time!
1) Open a Health Savings Account
A Health Savings Account (HSA) is a great way to put aside extra cash that is specifically used to help pay for medical expenses. As we age, we will all run into health issues in one form another.
Whether you need to get a hip replacement or knee cartilage regeneration for better mobility, you should have some cash on hand to help pay for it. While health insurance can help cover the bulk of your medical expenses, you will still need to have an account that is constantly growing and ready to help manage medical issues or emergencies.
And, keep in mind that you may easily qualify for an HSA, even if you’re retired!
While money is going digital, many people still handle a large portion of their finances in cash. With cash comes spare change, which can easily get lost or forgotten. So, go back to the old-school piggy bank method.
Anytime you come home with extra cash in your pocket, put it in a designated jar. Once the jar is full, put that money in a savings or investment account. You’ll be surprised just how much you can save from spare change!
Related: 8 Fun Ways to Save Money
3) Have Savings/Investments Automatically Deducted From Your Paycheck
Most people have some or all of their taxes automatically deducted from their paycheck. Since you never see that money, you can’t really miss it. Why not take the same approach with your retirement savings?
Even if you only have your bank automatically move $5 to your savings once per pay period, you are allowing that money to grow over time. And if you do it with “micro-payments,” it won’t feel as though you’re taking so much away from your available money. This is especially useful if you do not have much extra room in your budget for retirement.
So, start with just a percentage or two. Bonus points if you’re able to save 5%-10%, but it’s not necessary in order to get started with saving.
4) Try to Cut Back on Any Non-Essential Expenses
Finally, there are almost always strategies to ensure that you are spending less than you are earning. If you don’t earn a lot, it can be difficult at times. And it goes without saying that you shouldn’t make extreme cutbacks that put your health or safety at risk.
However, if you can find any non-essential expenses, try to cut them out of your budget (even if it is just for a few months) so that you can put that extra money aside for retirement.
Ready To Build Your Nest Egg?
There are many little tricks that you can try to build your nest egg faster. But as you can see, you don’t have to make huge sacrifices in order to do it! In fact, even the average American can save money to live their best life after 65. Will you be one of them?
AUTHOR Kimberly Studdard
Kim Studdard is a project manager for online entrepreneurs and small businesses. When she isn't spending time with her daughter and husband, or reading her growing pile of horror books, you'll find her working on her HR degree and working towards FIRE.