What Is a Nest Egg?

Grandfather playing with his grandson in living room.

When many of us hear the term “nest egg,” we automatically think of a retirement savings plan. And yes, a nest egg is a large sum of money that you grow over time to help achieve a later-in-life objective, such as retirement living. But a nest egg can actually be saved for other specific life events, as well. Even ones that happen before the age of 65. 

This may include:

  • Buying a home
  • Sending a child to college
  • Renting a vacation property
  • Making renovations & home updates
  • Paying for unexpected medical expenses

It’s up to you how you want to spend your nest egg but having a substantial amount of money or assets stored away will benefit you greatly when you are ready to retire. 

In fact, it might help you cover the life events listed above while retired, especially if your home requires emergency repairs, or you need a costly medical procedure. In this way, a nest egg provides an extra layer of protection for the unexpected—even if that is not what it was originally intended for.

What Is a Good Size Nest Egg?

The size of your nest egg will depend on three key factors:

  1. The specific goal you want to save for (i.e. retirement, traveling, home buying, etc.)
  2. The type of capital, bonds, and number of assets you’re hoping to grow in value and how you choose to invest them.
  3. The annual inflation rate (i.e., as the value of the dollar decreases, you’ll need to save more than you might think). 

Another important factor is age, as the younger you are, the less you may have to put into your nest egg. Also, when you are younger, you have the ability to select higher risk investments to help build your nest egg. Your health history may also play a significant role in how much you’ll want to save for your long-term goal.

Though these factors will impact how much you’ll want to save for your nest egg, you also want to ensure that you’re investing your nest egg wisely (i.e. conservatively vs. aggressively):

“A nest egg should typically be invested in relatively conservative instruments[,] such as certificates of deposit, bonds, and dividend-paying blue chips…It would be folly to invest nest egg proceeds in certain volatile investments in hopes of achieving a high rate of return,” (Investopedia).

How Can I Grow a Healthy Nest Egg?

The truth is there is no one-size-fits-all nest egg. Sure, you can look up what the average size of a nest egg is for retirement or for buying a home, but there will always be other contributing factors at play.

Our best advice? Meet with an experienced financial professional to help you make a plan and save with confidence. 

At Focus Financial, we offer a variety of individual and business financial planning services, all designed to help you save for your future goals—whether that is traveling to Italy to meet extended family or opening up a Bed and Breakfast.

We understand that just as every individual is unique, every financial plan should be personalized to each individual’s situation, passion, and goals. 

When you schedule a consultation with one of our dedicated financial planners, we’ll sit down and talk through your goals, savings strategies, and current financial health. 

From there, we’ll help you identify the right size nest egg, design a plan, and educate you on your options so you stay informed and confident. And because we know events can change, we’ll work to ensure that your financial plan stays on target and works to support you, not hinder you from living the life you deserve.

Connect with Us Today!

Ready to start saving and get on track with a better financial future? We’re here to help. Find an advisor near you to start the conversation! 

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