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Building a Retirement Nest Egg: Smart Approaches to Growing and Protecting Your Assets

Sunday, March 17, 2019   (0 Comments)
Posted by: Kristin Prine
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Building a Retirement Nest Egg: Smart Approaches to Growing and Protecting Your Assets

From Baby Boomers over age 50 who have been part of the workforce for several decades to Millennials in their twenties who are relatively new to the working world, Americans of all generations share a dream: to live comfortably later in life, with the lifestyle they desire, free from worries about running out of money.

Indeed, one reason people spend so much of their lives working is to earn money not only to meet their needs and wants today, but also to build a nest egg of savings they eventually can use during retirement.

Growing and protecting that nest egg is important, whether you plan to retire soon, decades from now or perhaps not at all. Here financial planning experts from the Financial Planning Association offer suggestions for how to go about it:

1. Enlist a retirement planning expert to develop a plan: Having dreams and goals you want to fulfill later in life means little without a plan to fulfill them. For an investment of just a few hours of your time and perhaps as little as a few hundred dollars, a Certified Financial Planner™ can help you develop a well-articulated strategy to get where you want to go in life, both in the near term and over the long haul, using a holistic, multi-disciplinary approach that encompasses investing strategy, retirement and insurance planning, debt management, tax planning and more. To find a CFP® in your area, check out the Financial Planning Association’s national database at

With a plan in place, you’re less likely to worry about financial security during retirement. Indeed, workers with a retirement plan are more than twice as likely to be “very confident” about having enough retirement savings as workers who lack a plan, according to recent findings by the Employee Benefits Research Institute .

2. Commit to saving: Setting aside even a small amount of your earnings each month in some kind of tax-favored retirement plan, such as a 401(k) or individual retirement account (IRA), can result in a sizable nest egg for retirement. Set up an automatic deposit to help you stick to the savings commitment. Start early or start late, but be sure to save something. While it’s optimal to start saving earlier to give assets more time to grow in value, it’s not too late for people in their forties and fifties to begin saving.

3. Maximize retirement plan contributions: One rule of thumb says to set aside 10-15% of your salary each year in a retirement account, according to Scott Ranby, a Certified Financial Planner™ with Kuhn Advisors in Denver, CO. Another is to save eight times your ending salary. “So, if you earn $80,000 [a year when you retire], your goal should be to end up with $640,000 when you retire,” he says.

To reach those goals, consider contributing as much you can afford, and as much as the law allows, to your retirement plan. The tax code sets limits on the amounts individuals and couples can contribute to various types of retirement accounts in a given year. Ask a tax specialist what those limits are for you, and plan accordingly.  

While it’s not formally classified as a retirement savings vehicle, a Health Savings Account is another tool to maximize retirement savings, says Certified Financial Planner™ Andrew Weckbach, founder of Scaling Independence in St. Louis, MO. Not only can a person deposit money into an HSA tax-free (up to a specified amount each year) and remove it tax-free to cover qualified medical expenses, they can leave money in the account and utilize investment options tied to the account to grow that money over time. “They can keep saving money into the account until retirement, then use it like an IRA, withdrawing money from it to use for medical or non-medical expenses, and paying taxes on the withdrawals like they would on withdrawals from an IRA.”

4. Prioritize tax diversification: It’s unwise to put your retirement nest egg in one basket, Weckbach cautions. For maximum flexibility and efficiency when the time comes to start spending down your nest egg, seek diversity in the tax categorization of your assets. Rather than put all your assets in qualified (pre-tax) retirement plans such as a 401(k) or traditional IRA, where contributions go in tax-free and are taxed on the way out, also be sure some of your assets reside in Roth accounts, where money is taxed on the way in, not the way out). It also makes sense in many situations to have some retirement assets in a taxable account, such as a brokerage account in which stocks and other assets are held outside a traditional retirement plan.

5. Seek asset diversification: The same all-eggs-in-one-basket adage applies to the type of assets you own. History tells us that one of the best ways to grow your money and increase your net worth is by building a diversified asset portfolio of stocks, bonds, mutual funds, exchange-traded funds (ETFs), real estate, etc.

If you’re lucky enough to have a employee pension plan from which to draw a guaranteed income throughout retirement, that, too, may dictate the approach to asset diversification. “Having a pension in your back pocket allows you to be more aggressive with some of your investments,” explains Weckbach.

A financial professional with investment expertise can provide valuable guidance in developing a diversified portfolio with an age- and objective-appropriate allocation strategy.  

6. Revisit your asset allocation strategy periodically, reallocating and rebalancing assets as circumstances and life stage dictate. “Ignore the short-term noise of the [stock] market and its inevitable stretches of volatility,” Ranby urges. “Focus on your long-term plan.”

November 2015 — This column is provided by the Financial Planning Association® (FPA®) of Illinois, the principle professional organization for CERTIFIED FINANCIAL PLANNERTM (CFP®) professionals. FPA is the community that fosters the value of financial planning and advances the financial planning profession and its members demonstrate and support a professional commitment to education and a client-centered financial planning process.  Please credit FPA of Illinois if you use this column in whole or in part.

The Financial Planning Association is the owner of trademark, service mark and collective membership mark rights in: FPA, FPA/Logo and FINANCIAL PLANNING ASSOCIATION.  The marks may not be used without written permission from the Financial Planning Association.

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