The Definition of a Retirement Nest Egg

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    Process

    • Determining your savings needs is a complex task. The easy part is figuring out all of your expenses. Add up everything that you owe or anything you expect to be a liability within a year. Projecting that figure out into the future, adjusting for inflation and trying to predict how your financial situation will change 10, 20 and 30 years from now may prove to be nearly impossible. But, you may use retirement calculators online to help you come up with some kind of figure (see Resources).

    Significance

    • A retirement nest egg helps prepare you for retirement since it represents the savings you'll live off of. You may find that you are unable to work, or unwilling to work, beyond a certain age. The requirements for you, in terms of savings, will not be the same as it is for other people.

    Types

    • There are many different types of retirement nest egg accounts. Employer-sponsored accounts include traditional and Roth 401k accounts, SIMPLE and SEP IRAs. All of these accounts are tied to the employer you work for. If you leave your employer, you can no longer contribute to that type of plan with your employer. Other accounts are individual accounts. These include Individual Retirement Accounts and annuities. Individual accounts are not tied to an employer. You may contribute to them regardless of where you work and may contain a wider range of investments for you to choose from than employer plans.

    Benefits

    • The benefits of having a retirement nest egg are that you don't have to worry about working for your entire life. Even if this is something you desire, you may not be physically able to do so. The nest egg also serves as emergency money. Many retirement plans contain some kind of provision for accessing the money in the event of an emergency. This means that you won't be caught in financial trouble without some means of accessing money to pay for unexpected financial liabilities.

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