Retirement Saving

5 Ways You’re Breaking Your Nest Egg

You know you should be saving for retirement. You might even be setting money aside each month in an account, building up your nest egg for the future. But are you really doing what you should when it comes to investing for the long-term?

The reality is that there’s a good chance you probably aren’t building your nest egg effectively for your long-term wealth. In fact, a March 2014 survey from the Employee Benefits Research Institute, or EBRI, indicates that even though 57% of workers save for retirement, 60% have less than $25,000 in total savings. While many workers might be saving for retirement, they might not be saving enough.

Before you become too complacent about your retirement savings, stop and consider that you might not be saving enough for retirement. These 5 mistakes can make things even worse:

1. Leaving Money on the Table

This is one of the worst things you can do for your nest egg. First of all, says Rob Drury, the executive director of the Association of Christian Financial Advisors, you need to start investing what money you can as early as you can.

“Time is by far the most important factor in the accumulation of retirement savings,” Drury says.

Don’t leave that money on the table. Even if you think it’s not enough to get started, you should contribute what you can. Don’t forget about employer matches, since that’s free money that can grow your nest egg.

2. Borrowing from Your Retirement Account

“It’s named ‘retirement plan’ for a reason, so stop borrowing from it for other uses — in spite of how important you think they are at the moment,” says Gail Cunningham of the National Foundation for Credit Counseling.

Even when you repay what you borrow, the reality is that you can’t replace the time that your capital wasn’t in your account, working for you.

Additionally, the interest you “pay yourself” when you repay a loan from your 401(k) usually doesn’t beat what you could have earned with the principal in the account. Even worse is when you withdraw early, incurring a 10% penalty and being required to pay taxes.

3. Neglecting Long-Term Care Needs

According to, about 70% of people turning 65 can expect to need long-term care at some point. You need to factor that into your retirement plans, and adjust your contributions accordingly.

Long-term care can “destroy a nest egg in a heartbeat,” Drury says. This means that you need to consider purchasing long-term care insurance, or build your nest egg up more dramatically so that you can self-insure, paying out of pocket.

4. Not Performing a Needs Assessment

One of the best things you can do is start out by performing a needs assessment. The EBRI data indicates that less than half of workers have even calculated what they will need in retirement. You can’t plan if you don’t know what to expect.

Drury suggests sitting down with a financial planner to map out a plan so that you know exactly how much to set aside now, and so that you have a solid strategy to fall back on.

5. Relying on a Single Retirement Resource

Too many retirees and would-be retirees don’t diversify.

“People need to save in addition to their work retirement plans,” Cunningham says. “There is a strong possibility that sources like Social Security will not provide adequate support.”

You also need to have a backup, just in case the stock market crashes just as you need your money.

Revenue diversity is an important part of retirement saving, so it’s a good idea to look beyond your 401(k) and Social Security. Consider business and investment income, immediate annuities, and other revenue streams that can protect you.

Retirement planning is all about making sure your future is as secure as you can make it. With the right moves, you can build a nest egg that isn’t likely to break, no matter what else is happening in the world.

About the author

Miranda Marquit

Miranda is a freelance journalist specializing in topics related to personal finance, investing, entrepreneurship, and small business. Since receiving her M.A. in Journalism from Syracuse University, her work has appeared on a number of web sites including Wise Bread, U.S. News & World Report, Forbes, AllBusiness, and Huffington Post. She writes for the Equifax blog and the Quizzle blog, and has written extensively about credit, retirement, insurance, and taxes for a number of other corporate blogs and web sites. Follow Miranda on Twitter, @MMarquit, and check out her personal finance blog, Planting Money Seeds.

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