Smart Money Investing: Building A Nest For Retirement

Smart money investing includes the creation of a plan for investing in your retirement. Retirement is one of the most important financial goals that all investors share. The earlier that an investor can begin the process of planning and saving for their retirement needs the better it will be when the time comes to beginning withdrawing income.

For most people, retirement planning is based on a faith that programs such as Social Security will provide an adequate source in which to live. This may not be true for many people, particularly those who experience some type of catastrophic health situation. The rising costs of health care and other expenses as we age, necessitates planning at an early stage in order to meet future costs.

Here are a few steps to assist you in the process of creating a retirement nest egg and planning for the time when you will have to rely on a fixed source of income.

Step 1: Create a Retirement Plan

The first step in creating a retirement plan is to determine your income needs for retirement. There are planners that suggest that you need 80 percent of your present income to meet your retirement needs while others who say that you need in excess of 100 to 120 percent of income. The amount that you need is based on what you need to live comfortable.

To determine this amount you will need to factor in things like the amount of debt that you may have including any remaining mortgage amounts, car loans and other unpaid bills. You can offset the amount of debt you have with any assets that are readily available such as home equity and cash in savings and checking accounts. A retirement plan is important in order to identify assets and determine income needs.

Step 2: Determine Sources for Investment

Identify the sources of income that you may have for retirement. Homeowners may consider such devices as reverse home mortgage and home equity loans, retirement plan assets from an employer and pension distributions. These assets will go toward meeting your retirement income needs and show any shortfall that you still need to fun in order to build an appropriate retirement nest egg.

Once you determine the amount of unmet need, establish a retirement plan that will help you meet any underfunded amount. These include traditional and Roth IRAs, additional funding in your company’s 401(k), annuities and cash-value life insurance.

Step 3: Monitor and Adjust

Once the plan has been funded, you need to monitor it on an on-going basis to determine if changes need to be made to your asset allocation. Your account will need to be rebalanced and adjusted in recognition of changes to the market in order to stay on track to meet your retirement needs.


The process for creating a comfortable retirement nest egg begins with creating, implementing and monitoring your retirement plan. The sooner that you begin this process the easier it will be to experience the necessary compounding to meet your income needs.

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