RETIREMENT

How to Build a Nest Egg

6 MINUTE READ
Do you know how much you’ll need to be able to retire? According to a
recent study, about 65% of American workers believe they will need
$500,000 or more to live comfortably in retirement.(1) Knowing that, you
might assume that most Americans are working on building a nest egg. But that’s not quite the story.

According to our Ramsey Research, half of Baby Boomers have less than
$10,000 saved for retirement.(2) And that’s the generation that has had
the longest to save! It’s no wonder that 56% of working Americans lose
sleep thinking about retirement.(3) When it comes to retirement savings,
most people are way behind and they know it.

If you want to have options in your golden years, most agree that you
need a sizable nest egg. But let’s face it, saving for retirement is
hard work, and it doesn’t happen overnight.

But here’s the great news: you’ve got two powerful tools when it comes
to building your retirement savings. Curious about what they are? Let’s
dig in.

Build Your Nest Egg With These Two Tools
Building a nest egg takes time and work, but it’s not complicated. All
it takes is harnessing your two most powerful wealth-building tools:
your income and compound growth.

Here’s how those two strategies create a winning game plan for your retirement savings.

#1: Leverage Your Income
The first key to building a nest egg is pretty obvious: You’ve got to actually save. If you never set aside any money for your future, you
won’t find it magically waiting on you the day you retire.

It’s easier said than done though, right? We get it. Setting aside part
of your income for the future is tough, especially when your budget
feels jam-packed as it is. That’s why it’s so important to get out of
debt and have a fully-funded emergency fund before you start investing.

Getting rid of your debt frees up your budget to save for the future.
And when you’ve got 3–6 months of expenses saved, you don’t have to
steal from your retirement to pay for an unexpected roof leak or car repair.

How much should you save for retirement?
We recommend saving 15% of your income toward retirement. If your
workplace offers a match on your 401(k) contributions, that’s the place
to start!

Once you’ve invested up to the match in your 401(k), invest the
remaining percentage of your retirement savings in a Roth IRA. A
financial advisor can help you choose good growth stock mutual funds and
keep your retirement portfolios diversified.

#2: Harness the Power of Compound Growth
When it comes to your retirement savings, don’t underestimate the power
of time. The earlier you start investing, the longer your money has to
grow. That’s right, we’re talking about compound growth!

Consider Jen and Amber. They both know the importance of saving for
retirement, but they take two different paths to get there.

Jen gets a jump on her retirement fund as soon as she becomes eligible
to open a 401(k) account at her first job. She starts throwing $3,000 a
year toward retirement at age 24. On her 35th birthday, she decides
she’s saved enough and doesn’t put another penny toward retirement from then on. She has invested $33,000 of her own cash over the course of 11
years.
Amber waits until she’s more established to start her retirement
savings. By the time she’s 35, she has bought her first home and finally feels ready to focus on the future. She stockpiles $3,000 a year in her
401(k) and keeps that pace up until she turns 65. Thirty-one years of
investing brings Amber’s out-of-pocket total to $93,000.
After the retirement party dust settles, Jen and Amber stack their nest
eggs up against each other. Let’s assume both of their nest eggs grew at
the historical average return rate of the S&P 500 over the life of the investment. Who do you think comes out on top? The results may surprise you.


Crazy as it may seem, Amber shelled out three times more money than
Jen—yet retired with only half the retirement fund. How did Jen end up
with nearly $1.2 million, while Amber barely broke $600,000?

It all comes down to the power of compound interest.

Both Jen and Amber invested in growth stock mutual funds that earned the
market average. But Jen gave her money more time to grow—and that made
all the difference in the size of their nest eggs. With compound
interest, time really does equal money!

Getting a Late Start on Your Retirement Savings?
This example is clear proof that opportunity doesn’t wait. Every day you
put off saving for retirement, you lose the chance to earn free money.

But all’s not lost if you’re out of your 20s and still haven’t started investing. That’s because compound interest isn’t the only tool you’ve got. How much you invest matters just as much!

Let’s say you’re 40 years old with no retirement savings. Can you still retire a millionaire? Absolutely! You’ll just have to contribute more
cash to get there. If you invested around $650 a month, you could have
just over $1 million in retirement. It’s not too late to get started!

Start Building Your Nest Egg Today!
Building a nest egg isn’t rocket science. You just need to harness your
most powerful tools: your income and compound growth. Of course, the
sooner you start saving, the quicker you’ll reach your goal—with less
money out of your pocket.

If you’re not sure what it will take to hit your retirement target, ask
an investing pro you trust to show you your options. Not only will a pro
help you understand your investments, but they can also help you build a retirement plan you feel good about.

No wonder our Ramsey Research found that those who work with a financial advisor are nearly twice as likely as those who don’t to say they are
very confident they’ll have enough money to retire.(4) An investing pro
can help you plan for a brighter future, no matter your starting point.

So what are you waiting for? Kick-start your retirement savings today.

Find an investing pro!

Understand & Own Your Investing Future
Get Started
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