Ah, the retirement nest egg. A mere mention of the term brings to mind feelings of comfort and security—that is, if yours is actually growing at a healthy rate. Whether you’ve just started your career or are coming into the home-stretch of your professional life, there are things that you can do now to help boost your nest egg instead of watching it dwindle from afar.
Without further ado, here are five tips for maximizing your nest egg.
1. Conduct a Financial Analysis on Yourself
Perhaps you’ve been saving for decades or maybe you’ve just opened your first savings account. Either way, you owe it to yourself to get a clear view of your current financial situation, no matter what it might look like. Create a “net worth” statement that subtracts your debts from your assets, and take a moment to analyze how your cash flow has shifted during the past two years. You’ll need to pull out a handful of bank statements, but you’ll end up with a prediction of where things are heading—an essential baseline for getting the most out of your nest egg.
2. Don’t Wait—Start Contributing Today
If you haven’t been contributing to your employer’s 401(k) plan, don’t wait until next year or even next month—start today. A 401(k) allows you to make contributions of pre-tax money, resulting in a significant tax savings over a given span of time. Plus, many employers will match contributions to an extent, but only if you’re actually making contributions in the first place. Though it might seem as though it’s cutting into your paycheck, meeting your employer’s match will bode extremely well for your nest egg, and the sooner you can get started, the better.
3. Create a Cash Safety Net
Many experts agree that it’s extremely important to enter retirement with a cash safety net. That is, enough cash to take care of a year’s worth of expenditures. This is money that is to be placed in a savings account (preferably one that bears interest) and should never be touched unless an absolute emergency presents itself. It’s a security blanket that exists on top of the social security benefits, pension, and other forms of income you’ll rely on throughout retirement, and one that can bring you a great deal of peace of mind.
4. Establish an IRA
An individual retirement account (IRA) can be a huge aid to your nest egg, particularly a Roth IRA. Roth IRAs are funded with after-tax money, which means that when you reach the age of 59½, you will qualify for tax-free withdrawals, hence establishing a much lower tax liability for yourself in the future. Note that a traditional IRA could be better than the Roth variety for people in certain tax brackets—work with a financial advisor to determine which option is best for you.
5. Don’t Claim Your Social Security Benefits Early
Did you know that you can increase the amount of Social Security benefits you receive simply by delaying your claim? With each passing year after the age of 62, benefits become more and more significant, until you reach age 70. There might be circumstances in which claiming benefits early is tempting, but the longer you can hold off, the more you stand to gain.
Keep a close eye on that nest egg, and remember—just like a plant, it will only grow if you give it the love and attention it deserves.