A Nest Egg Can Be Wonderful. Make It Happen!

Creating a retirement nest egg can make the remainder of your life a financial breeze. Prepare properly and enjoy all that life has to offer.

Too many "baby boomers" are consumers rather than "savers". When the paychecks end, so will their financial freedom. They claim that they cannot save for retirement because of a mortgage, children's college, and other expenses.


Are You a Consumer or a Saver?

Besides the above mentioned expenses there is no end to the list of "things" that are needed, such as: new cars, motorcycles, TV's, clothes, vacations, etc. These "things" eventually get old, out-of-date, used, and are discarded or sold at a minuscule fraction of their purchase price. 

These retirees-to-be are not practicing delayed gratification. Some of these items may end up costing even more than the sales price because the credit card balance was not paid up each month creating interest payments.

In another example, a car may have been purchased with a car loan. The price of the car is increased by the interest paid on the loan. Rather than saving the money for the car, then purchasing it, the car may have been bought now and paid for in the future.

Excuses or Financial Responsibility?

This type of financial responsibility makes building a retirement nest egg impossible. There will never be an opportunity to save for retirement, if there are debts to pay off. Interest is due on the debts and the debtor ends up having another boss - the lender.

Fortunately, my parents impressed upon me that only one type of personal debt is acceptable, that is, a home mortgage. It is tolerable because it replaces rent and builds equity. A loan for a profitable business would also be an acceptable expense.

The "Grand Slam", Retirement Nest Egg!

It is having $2 million dollars saved for retirement. Financial advisors agree that removing 4 to 5 percent each year will keep your savings intact for even a 30 year retirement. Removing 4 percent of $2 million, each year, would result in an income of $80,000 that could be added to your Social Security benefit.

To accomplish the "grand slam" there are several things that must happen.

  1. Start saving for retirement about 30 or 40 years before your retirement date.
  2. Have a sufficient and steady income to allow 20 percent of your (and your spouse's) income to be saved each year.
  3. Live below your "means".
  4. Avoid severe stock market gyrations and periods of hyper-inflation.
  5. Have a healthy life, avoiding extreme medical expenses and an inability to work.

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That type of good luck may seem impossible at first glance. However, that has been the scenario for most "baby boomers". Knowing that most retirees are not financially prepared for retirement, where did they fail?

Most failed on only two of the five points. They did not start saving early enough and they did not live below their "means". The other factors were near their long-term average for those 30 to 40 years. Saving more during the good times would have leveled things out.

Hitting a "grand slam" or even a "double" ($1 million in savings) is doable. See Becoming a Millionaire and Key to Success for some examples.

Keep It Simple - Because It Is Not Complicated!

Review and, if necessary, re-balance your financial goals every month. Keep it all on one page. I set the first day of each month as my date to review.

It could be a combination budget sheet and savings plan or any really simple fact sheet that is updated and reviewed monthly. Without this type of guide, your road map to your future is likely to wander aimlessly. Keep your plan on track.

It is very rewarding to see your intermediate goals reached. It is even more rewarding to see long-range goals attained. 

Retirement Calculators: Are They Useful?

Building a retirement nest egg by using one of these calculators can be useful if you are really good at predicting the future. You will be asked to predict your retirement age, inflation, average return on your investments, how much money you will save, and how much money you will need in retirement. Oh, I forgot one. You will need to predict how long you will live. If you get all of those things right, the retirement calculator will give you the accurate answer (to your guesses). 

But, the calculators can be useful if you review your circumstances annually. Just as wills and living trusts must be updated as births, deaths and circumstances change, so does the information that you feed the calculator.


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