How to Build Your Nest Egg

If you have less than $1,000 saved for your retirement, you aren’t alone. According to the Employee Benefits Research Institute, 37 percent of employees age 35 - 44 and 34 percent of employees age 45 - 54 have less than $1,000 saved for retirement.

If you’re in this category, all is not lost. You can build a decent nest egg, but you need to take certain steps.

Here are some tips to consider when investing at age 40 or older:

* If your employer offers a 401(k) plan, you should consider investing at least enough to get the maximum matching contribution. This year, the IRS allows individuals to put up to $19,000 into a 401(k). That’s up from $18,500 from 2018.

* Still have discretionary income to invest for retirement or don’t have a 401(k) plan from your employer? You may be able to open a Roth Individual Retirement Account (IRA). Depending upon income and filing status, an individual can invest up to $6,000 this year. The benefit of having a Roth IRA is that withdrawals upon retirement are not taxed.

* Be mindful of risk. You may get higher returns with greater risk but greater risk can also mean potentially greater losses. Make sure your risks are aligned with your emotional tolerance for risk and with your age. Typically, the closer you get to retirement, the lower the risk you may want to assume.

* A very simple tactic to boost the retirement fund is to save more and spend less. Easier said than done, of course, but it is possible. Spending less can be a huge boon to your retirement account. Taking a good hard look at your budget, and seeing where you can cut back, can be beneficial.

* It may help to eliminate debt, and use it only for big purchases, like a house. If there’s something you desperately want, save up for it, and don’t max out the credit cards. To get rid of debt, start with the highest interest items first, and use any extra money to pay off the debt.

* Consider freezing your credit or cutting up your cards. If you take a hard look at your credit card balances, you’ll realize that if you’re just paying the minimum amount each month, it’s extremely difficult to promptly pay off even a small balance. Another tip to make faster progress is to make a big payment on one account each month until it’s paid off.

* You can also ask your creditor for a lower interest rate. If you have a good credit history, you have a better chance at negotiating lower rates.

* Many people try to take money from their retirement funds to pay off debt. Generally, this is a bad idea because you may face early withdrawal penalties and additional tax liability. This also defeats the purpose of securing a prosperous nest egg.

* One final tip is to refrain from looking at your portfolio every day. If you check it too frequently, you may start making too many emotional decisions that won’t bear fruit.

Suzanne M. Akian, CFP ® is a Financial Advisor with the Global Wealth Management Division of Morgan Stanley in New York, NY. She can be reached at 212-613-6773 or at http://fa.morganstanleyindividual.com/akianzalanskas/.