What Does Nest Egg Mean To You?

By Eric Coon | September 7, 2019

When it comes to your retirement many people look at their 401k’s, 403(b)’s, TSP, Social Security, Investment Property, Precious Metals, Bank Accounts, etc. These vehicles of savings are what we call a Nest Egg.

A Nest Egg is a sum of money being saved so that it can be used in the future. Typically, when we use the term “Nest Egg” we are referring to a retirement account.

So, what is the average size of the retirement Nest Egg?

A 2019 analysis of more than 30 million retirement accounts by Fidelity Investments found that the average balance in corporate-sponsored 401k plans at the end of 2018 was $95,600. For traditional, Roth and rollover IRA’s, the figure was $98,400. And for the 403(b)’s and other defined contribution retirement plans ins the non-profit sector, it was $78,700.

Understanding where you are in building for retirement and having a plan to achieve a goal, so you can live the lifestyle you want is where most people tend to fall short. Yes, they may say I want $500,000 to live on when I retire, but how does that fit their needs. If their needs are $100,000 per year, then that nest egg will only last 5 years. What are you going to do then?

So, a better question to ask instead of, “What is the size of the average retirement nest egg?” would be. “How much will I need in retirement?”

Let’s take a look at social security…

When I ask the question to baby boomers, they know that they will get some amount of social security when they retire. Most of them have little information about what that number will look like. Well, if you don’t know what your annual income or monthly income will be from social security, then how can you plan your retirement and what you may need additionally, to supplement your retirement goals.

When I ask the same question to 30 – 50-year old’s, many will tell me that they don’t even think social security will be there when they retire. So, they have a problem. What are they going to do to prepare, where are they going to invest to give them a retirement lifestyle?

Let’s talk about 401k, 403b, TSP accounts.

All of these kinds of accounts are Market based. Meaning, that when the market is up, they are earning money. But what about when the market is down, then the same account is losing money. And although the employer is contributing to the account, many people saw large losses in the 2008 Recession. So, how can you depend on such volatility?

Some of my clients say they place most of their money in a money market account to avoid the market losses. But with such a low interest rates, they can’t begin to keep up with inflation and their growth is only 1% - 2%. At those rates, your money is not working for you, and growing in the capacity that will produce what you may need to supplement your social security and provide for a happy retirement.

Let’s say for a moment, that an individual accumulated $100,000 in a 401k and with their social security they earn $2500 per month. If their living expenses are $3500 per month, then they will need $1,000 from their 401k monthly. That $100,000 will only last them 8 years and then they will need to find another way to earn at least $1,000 per month just to be able to handle their expenses.

This is why you may see some retirees working at department stores, fast food restaurants, grocery stores. Not, because they want to. And maybe some do. But because they can’t afford to retire with such a small nest egg. Their dreams of being able to take those trips they all wanted to go on. Purchase the boat, visit with the grandkids, and just enjoy life has been drastically affected because the amount of wealth that is needed, was never achieved.

So, back to the question, “What does your nest egg mean to you?”

If you are an individual that wants to plan and achieve your retirement goals, then through our proprietary process, we can help you. We will look at your whole portfolio, provide some guided steps that will help you to achieve those goals. If you are looking for the magic potion, quick fix solution, then keep dreaming. We are about solid proven strategies that have helped millions of people have a better retirement.

What does the phrase nest egg mean?

A nest egg is a substantial sum of money or other assets that have been saved or invested for a specific purpose. Such assets are generally earmarked for longer-term objectives, the most common being retirement, buying a home, and education.