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The perfect “Nest Egg” this Easter?
Wednesday, April 1, 2015
The term "nest egg" originates in the 14th century but its use as a term to describe savings comes from 17th century farmers who would put fake eggs in nests to encourage hens to lay more real eggs. More eggs meant more money for the farmer, hence the phrase “nest egg”.
Over the years it has become associated with saving for a rainy day, creating a reserve for use in an emergency or to provide retirement income. Increasingly the nest egg is coming under pressure with expanding demands on expenditure and with people living longer, prolonging the period where financial support may be most needed.
So what makes the perfect nest egg? Just how do you make sure your savings last as long as you do and at a comfortable level?
Your nest egg requirement will depend on a number of factors relating to your financial situation. The biggest of these is how much of your retirement income needs to come from that egg. If you have a good pension, your nest egg will be for life’s little extras and big expenditures. But without a pension, you’ll need enough put away to provide steady income for the rest of your life.
From April, the over-55s will be able to withdraw money from their pension funds to spend as they wish. For some it’s an opportunity to spend, spend, spend! For others it allows them to supplement their pension with the purchase of a buy-to-let property. Already one in three are opting for a property nest egg rather than a conventional pension, and these new changes mean that “property pensions” are likely to surge in popularity.
One option is to sell and move into a development specifically for the over 55s with tailored facilities to cater for your health and leisure needs as you get older. At the same time, buying a property “nest egg” to let out, will provide a monthly income whilst maintaining a significant asset in property.
If you have significant equity in your home but retirement housing is not for you, a simple downsize and buy-to-let can achieve similar objectives. Downsizing to realise equity and free up cash for financial investments that provide a regular income to fund a longer retirement is also on the increase.
For more information see our comprehensive Buy-to-let Investment guide or contact your local Frost office.