How an Investment Nest Egg Works in Retirement (for Beginners)
We live in a world where consumption is the order of the day. All manner of things are consumed constantly. From fast food, social media, and even the air the we breath. Showing you how an investment nest egg works in retirement could be profound is staring as a beginner.
Your early retirement aspirations would require a financial vehicle – usually called a financial or investment nest egg. The fund is created while you’re in your earning years. It affords you the opportunity to retire at any age you desire. Whether sooner or later, retirement is expected to be as comfortable as possible. Having all you need to pay for all your consumption and more.
Want to know how an investment nest egg works in retirement? It is best to build one while you’re in your earning years. It is pointless creating such a fund in the middle of retirement or when you have just a year to go. The power of compound interest will favor only those who have a fair amount of time on their side.
Although your retirement need not be the orthodox 65-ish number. You can actually retire early. The choice is yours; and this is something that mainstream society do not talk about. This article is geared towards both the young and old. No matter your situation, a retirement into a life of financial freedom is possible.
The Formula to How an Investment Nest Egg Works in Retirement
Investment Strategy
Investments are the financial vehicles or assets that you acquire with your savings. How an investment nest egg works in retirement to grow your wealth is simple. The financial instruments give you a return at the end of a period or predictable activity. On the Financial Freedom Sage blog, we love stocks. That’s why we think the stock market is the best place to invest your money hands down.
Besides individual stocks, there also Index Funds, Exchange Traded Funds (ETFs). Other non-equity investments include:
Non-Equity Investments for Building a Nest-Egg
- Certificates of Deposits (CDs)
- Treasury Bills
- High-Yield Savings
- Bonds
What is an investment strategy?
Your investment strategy is the way in which you invest. Other people might call this your philosophy of investing. But either is not far from the truth. Your strategy can be as basic as investing only in ETFs using Dollar-Cost Averaging (DCA) on a monthly basis. Picking only broad market indexes like an S&P 500 index (VOO) ETF over the long-term.
See how we put clarity on that investment activity above. We established the asset class or sub-class. Next, the exact ticker sign (for identification). Then use DCA to keep buying indefinitely. Buying at whatever price the market throws at us with a fixed dollar amount each month of the year. This strategy is how an investment nest egg works in retirement for your financial freedom.
Sources of Funding Your Investment Nest Egg
Next, you will just have to determine where this money is going to come from. That’s right! What is the source of income? Most people start life with skills and a regular job, part-time work, or a vocation of some sort. A full-time 9 to 5 work with an employer is pretty a common ground. A side-hustle will also generate additional income – to nourish your money tree.
Knowing how an investment nest egg works in retirement will be a plus. As your source of income is established, you need to extract the golden savings. A lot of working class citizens hardly have much savings. This is because they live well above their means instead of below them. Start allocation a sustainable amount of your after-tax income using a budget.
Savings are the raw materials for buying those ETFs, Real Estate Investment Trusts (REITs), Money Market Instruments, or individual Stocks we want.
The Law of Budgeting
Budgeting is a basic arithmetic weekly, monthly (or even daily) task that seeks to make sense of your money. Do not let this scare you in any way. You can make it as basic as you like. You can do this on a napkin or the palm of your hand. Just put a few numbers down. That’s how an investment nest egg works in retirement from the beginning.
An Easy to Use Budget System
Write how much you’ve made, or are making (or about to earn). Then allocate or distribute this nice figure among just three (3) categories. They are NEEDS, WANTS, and SAVINGS. We’re discussing the famous 50-30-20 Budget Rule here. So 50% of your after-tax income (combined from all sources) should be allocated to your needs. Then set aside 30% for your wants. Then finally place 20% towards your savings. More on the topic of budgeting here.
The Habit of Saving Money
We’re most interested in the Savings bit. These are the golden seeds we’ll be needing at the arrival of each paycheck, wage, or other income. This 20% would be used to invest in the financial asset of your choice. Remember we spoke about strategy? We could just follow the basic premise systematically and consistently.
The final tip here is to use automation. Setup the automatic disbursement of the 20% savings to be deposited directly into that account containing your investments (ETFs, Stocks, etc). This will free up your brain to concentrate on more vital activities.
Investing Intelligently
We have pretty much outlined all the basic steps you need. You have uncovered how an investment nest egg works in retirement. You can’t go wrong from this point on if you follow these basic suggestions. They’re not investment advice. I have used these same ideas for my own nest egg, and other investors are doing the same.
Learn to Invest
But you have to bulletproof your wealth and make the outcome more predictable. You need to learn all you can about investing. You’ll be reading books and articles like these online – for the balance of your life. Search Youtube videos and find mentors on social platforms like X and LinkedIn to learn investing.
Stay Obsessed About Investing
Acquaint yourself with the asset class that you’ve chosen. For me it was individual stocks. I never got tired of watching the ticker scroll across CNBC and Bloomberg channels. My ears where spread like a rabbit looking for vital information.
I read financial publications on a daily basis for years – alongside great investing books I bought for my personal library. Investing is how an investment nest egg works in retirement to generate wealth.
Emergency Money
If you’re all fired up now – like I was in my mid 20s, then congrats! I was hungry then. I couldn’t wait to attain financial freedom. I’ll share an important item about Emergency Funds to help you avoid the “valley of the shadow of death” I’ve been through.
Emergency Funds are so vital today more than ever. How an investment nest egg works in retirement is as follows: They’re 3 to 6 months of living expenses put aside to do a number of things. Here are the three (3) core objectives of emergency or contingency funds no one told me about.
3 Objectives of Emergency Funds
- Pay yourself from the fund in the event of a financial crises – such as a job loss, loss of expected income (especially if you’re the bread-winner).
- Pay yourself a lump-sum to cover unexpected car or home repairs after a disaster or accidental damages.
- Keep your investment nest egg safer. You wouldn’t need to perform premature withdrawals in the event of financial emergencies.
Keep your emergency or safety net fund in a high yield savings account. This is the default standard for many families. The account will give you above average yield than a normal savings account. You would also have instant access to funds (liquidity) and they’re most needed. But if you want more Emergency Fund ideas, then read this next:
Sage Tip: How to Build a Durable Emergency Fund to Weather Financial Storms
The Millionaire Dream/Goal
The emergency fund is so pivotal I wish I’d know this 20 years ago. When you have this in place, compound interest will not be interrupted. You could compound money and become a millionaire in no time.
Dedication and Hard Work
But it takes a lot of resilience and commitment on your part to see your dreams come true. Early retirement would no longer seem like a pipe dream. Your pipe will flow with gold if you live by the creed of financial empowerment. That’s just how an investment nest egg works in retirement for you.
To become a millionaire, you must maximize all inputs to your nest egg. Become the best at what you do, and the world (sometimes your employer) will reward you with the benefits that you deserve. Your cash benefits and multiple sources of income will increase your investment nest egg.
Invest Intelligently
Next, find the best investment(s) in the world whose economics are a second-nature to you. How an investment nest egg works in retirement requires focus. Let your assets produce the highest returns.
Understand the thin line between risk and leverage, and turn a 30 year financial journey into a 7 to 10 years course for financial freedom. Yes, you heard me right. You can shorten your financial freedom number from 65 to 35 is you want.
Build a Strategic Side-Hustle
You could even do this while you’re in your 20s with a personal brand, and massive global vision – using the internet. Your millionaire goal can include building a side-hustle to leverage the income you earn from your main job.
A few parting words about how an investment nest egg works in retirement
The parting words that I would leave with you is this: Make it happen today! Let this be the year you get started. Or if you’ve begun investing, take this seriously. An investment nest egg may take a long time to hatch into turquoise flamingos. You need to find a way to warm the eggs and be a great mama of a fulfilling life of wealth and happiness.
How an investment nest egg works in retirement begins with investing in yourself. Your journey to building wealth begins on your inside. Your prosperity would be meaningless without joy and a good night’s sleep.
You’ll eventually retire into a labor of love; doing only work that you love. Become rich inside-out by making a deliberate decision today. Start now, my friend.
Sage Topic Family:
- How an Investment Nest Egg Works in Retirement
- How do you make a financial nest egg for beginners?
Please share your views and hang your questions on my neck so I can wake up at 3 am to respond to ALL of them. My personal journey does not end, until I take many of my readers with me to financial freedom. Good luck.
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