How to Determine the Size of a 401k Nest Egg?

Written by , January 8, 2011

Planning the exact amount of money necessary to enjoy a comfortable retirement can seem like an impossible task. Individuals and families sometimes struggle to find the right balance between enjoying retirement and skimping on spending to be sure there will be enough to last.

Setting any budget for a ten to twenty year period can be a challenge. Answering a few questions will help start the process of determining the right size for a 401k nest egg. More is always better when it comes to preparing for the future. It still helps to know how much is necessary to fund the plans of tomorrow. Here is some advice about the kinds of questions you need to answer.

Questions to Answer for Retirement Planning

  • What are the plans for the retirement period? The amount of travel, hobbies and other leisure activities that are on the agenda will add to the size that the 401k nest needs to grow to.
  • Will the retiree continue to work? Many people discover that once retirement sets in, not being productive becomes more of a burden than an enjoyment. Some choose to go back to work. Continuing to work will add income instead of depleting resources, adding to the time span the nest egg will be able to stretch.
  • At what age will the individual choose to retire? The earlier the retirement, the larger the 401k nest egg will need to be. Keep in mind that later retirement also means that funds will continue to be invested in the 401k account for a longer period of time.
  • Will there be additional income besides the 401k account? Many retirees receive benefits from pension plans, Social Security and other sources can decrease the amount of resources that need to be tapped into from the 401k, allowing that fund to last longer than if it completely supports your retirement.
  • Every individual should sit down and create a budget that will reflect the potential economic situation after retirement. The budget can be used to determine not only the amount of the 401k nest egg that will be required to fund retirement, but can also be used to set up a system that will grow that nest egg to the appropriate size.

    The more planning that you put into the prospect of retiring, the easier it will be to come up with the correct amount of funding needed to make your retirement dream a reality. The time to start the process of preparing for retirement is right now.

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