North County Times > It's Your Life

Seven Tips to Improve Your Nest Egg

by Candace Bahr

The 47 million workers who participate in 401(k)s have saved more than $2 trillion. This is a significant amount of money, but it may not be enough to maintain their lifestyle in retirement. In a recent survey, 40 percent of retirees said that their living expenses in retirement were higher than they had expected before retirement.

To be sure that you have enough to last a lifetime, here are seven tips for managing your funds to keep your nest egg growing:

  • Think long term
    Subtract your age from 115 to compute the minimum percentage of growth-oriented investments that you should own. If you are married, anticipate that one of you may live longer than you think. For a couple retiring at age 65, there's a 50 percent probability that at least one spouse will live beyond 90 years old.

  • Send your pension to your IRA
    Your pension may be worth more as a lump sum rather than a stream of payments. And in addition, an IRA gives you greater flexibility. Have a savvy professional make the computation to see what's best for you.

  • Anticipate the rising cost of living
    Inflation won't retire when you do, and it's likely that costs will double for your family during your retirement years. You'll need to depend on the growth of your nest egg to keep up with increasing costs.

  • Don't tap retirement funds too soon, or you'll have less income later on
    This includes Social Security benefits. Taking early benefits can be costly, particularly if you live beyond 80. Waiting until you are 65-67 to take benefits means that you'll receive at least 20 percent more each year.

  • Realize that Medicare doesn't equal long-term care
    Convalescent expenses can smash your nest egg. And Medicare benefits kick in for just a limited time following a hospital stay. Long-term care is especially important for couples.

  • Save tax-deferred income for last
    If you have an IRA or other retirement plan, spend your other income first, letting the funds grow tax-deferred. An exception: If your required minimum distributions are going to be large enough to put you into the next tax bracket, then begin taking distributions earlier to thin out the retirement. And pass your Roth IRAs on to your heirs, if possible.

  • Get regular checkups
    Financial checkups are just as important as medical checkups, to make sure that your portfolio is functioning properly and working hard enough to meet your goals. Periodic checkups can prevent future financial problems.