Has the idea that you're saving too much ever occur to you?

Life has twist and turns and common sense says that one should save as much as one possibly can. The idea of saving should always be accompanied by a goal or a set of goals such as retirement, college for the kids, a brand new car, a vacation, etc.

But what happens when one is covering all those things and starts feeling that might saving to much? I plugged my retirement plan and my other savings (mutual funds and IRAs at Vanguard, HSAs, 529s, etc) and realized that if I continue to save the same rate I have had, the amount of money at retirement (55) will more than double/cover my retirement.

I don't know if the "Twilight Zone" feeling I'm having is real or a result of many years planning. My working class upbringing does not allow me to believe the numbers I'm seeing.

I'm grateful for this but wonder if others have felt the same way and what have they done once this great moment arrives.

Peter

What a quandary....if you are saving without enjoying life, now is the time to start.

So what if you are saving a lot? This is not a bad thing, unless your ridiculously frugal to the point where you won't turn on the heat if its cold and snowing.

Perhaps your numbers will come to fruition. Perhaps they won't. Nothing is certain.

We are balancing gratification today and gratification tomorrow. With the amount of uncertainty the future holds and depending on your goals, maybe you want to "save too much." maybe you don't. The important thing is to find that sweet spot where you are happy today and happy with how you are progressing towards your goals in the future.

It sounds like you're in a place of financial freedom. You say that you'll be way ahead to retire at 55. What about retiring at 50, or 45?

What about running for Congress? Last I checked you needed a spare million or so to do that. Seriously though, if you wanted to run for local or state political positions you'd have money to run your campaigns with.

What about becoming a "small-time" philanthropist? My Dad is near retirement and has floated the idea of working an extra year or two and giving 100% of the cashflow away to noble causes. Sounds thrilling to me.

Congrats on being in this situation. It is high preferable to the alternative.

If you will have double what you need, then why keep saving it? Spend it now, or if you just cannot think of anything worthwhile, give it to a charity.

Just make sure the amount you do save will be enough in the most pessimistic scenario(say, you make 4% return on investments and live to 110).

How sure are you that you'll have too much when you hit 55? How conservative were the assumptions you used to come up with the estimate? What would the consequences be if you get to 55 and your assumptions were optimistic?

What else would you do with the money, today or in the near(er) future?

How "finalized" is your life situation? I thought I had too much money. Then I had a kid and bought a house. Problem solved! However if you've already got the home, kids, vehicles, career etc that you expect to live with for a decade or two, that may not apply to you.

I chose to save "too much" early on so that I would have flexibility to not have to save at the same rates later on. After all, we can't totally predict the future.

But some things I could predict. I wanted to have children and this year while I was saving for the medical bills and covering a partial loss of my salary, I lowered my retirement savings. I'm comfortable doing that because I've been ahead for so long. And I can ramp it back up fast or slower as I feel I need. I've got a solid base to allow me that freedom.

I think saving as much as possible early on is a brilliant strategy. As long as you're not depriving yourself to the point that you're really unhappy, I think you're good. And then as retirement gets closer, you can decide what to do with the increased freedom. Live bigger? Retire sooner? Plan to leave money to charities or family? All sorts of options...

Savarel, I'm using a 4% return for my projections and I'm still OK. I'm very grateful for this and thank the big guy on a daily basis.

And I am enjoying life and giving to charity and securing the future of my daughters. Not so they can grow up with silver spoons, but so that their education is the best I can provide.

Having covered all these basic things, and after much thinking and consulting with the important people in my life, I've decided to just give more to charity. I don't boast about this and very few people in my family and friends know that I do this.

One should have a hierarchy of needs or a sort of a flowchart or map that allows us to decide if we are doing it right with money or not. The way this happens in real life, everyone develops their map at their own pace, making their own mistakes and considering one's priorities. For example, I think about covering my retirement and my daughters' education and that becomes part of my flowchart.

I heard this on a show years ago and wrote it:
1 - Do you have 8 months of expenses saved in an emergency fund?
2 - Do you own a home?
3 - Is it under water?
4 - Did you put down 20% down?
5 - Are you fully funding your 401K or IRA or retirement account?
6 - Do you have any credit card or consumer loan debt?

This list is missing many other things and, as I said, it would be a reflection of your life and your values.

But the point of this posting was the eerie feeling that I'm sure many of us have had of asking ourselves "Am I saving too much?"

It's really up to you to decide.

I think the list peterjon posted is a nice rule of thumb. Also, take into account the level of life you would like to live after retirement (I.E retirement homes, travel etc) and see what level of saving will get you there.

As others mentioned, it's also a question of what you have been giving up to save "too much". How many things you really enjoy and feel that are missing in your life right now did you give up to save this much?

How do you determine if a priority is fulfilled? I can think of three options:
1) When the dollar amount allocated to that goal meets the dollar amount of the goal.
2) When the dollar amount allocated to that goal, projected forward with an estimated growth rate, would meet the goal at the estimated goal date (with no further contributions).
3) When the allocation with both estimated growth and continued contributions at the current rate of contribution, would meet the goal at the estimated date.

The last is based on a lot of assumptions - about future income, growth, unforeseen expenses, and more. If things don't go according to plan, either you have to take money away from other priorities later, or the goal has to be revised or abandoned.

On the other hand, the first is very conservative and may lead to oversaving. Depending on the specifics that can be OK or it can be pretty bad. For instance, if you are saving in a savings account, if you accumulate too much you can just transfer it to another goal. Similarly if it's invested in stocks, funds, or bonds in an unrestricted account. (Though in investments it has the chance to go down, since you've acquired too much for the given goal, it's likely the investment did at least as well as expected.) Worse is if the money is in a restricted account such as a retirement account or 529 plan. Though in some cases, that's not necessarily as bad as it seems - for instance you may be able to donate the excess to charity, or leave it to heirs, if either was also one of your other goals. Another factor is "resources" like maximum contributions and matching contributions. That's one way in which saving a lot now and then scaling back later can be significantly different than saving more smoothly over time.

Personally, for my household we are between statuses two and three for our known long term goals (retirement and our children's college education). If we keep saving at the rate we are now, we'll have way too much when the goal comes due. But, I would rather have too much money than too little saved. And honestly, with only those two huge goals and no intermediate goals, it's safe to say that I don't know what Future Me is going to have as his goals.

Why not 30, or 35?

Because he has ambition?

Because he likes his job?

Because he would like to actually keep contributing to society rather than just sit around all day and consume things?

Because he gets bored easily?

Because he likes the routine/social aspect of his career?

Life is not a competition to see who can hurry up and be lazy the fastest.

sounds like you have no idea what you're talking about, and would rather mindlessly grind away than learn how to do things better

Well, I envy you being fairly sure you will have "double what you need for retirement at 55". We were not 100% sure ourselves right up until the last year before actual retirement date. We have defined benefit pensions with retiree health benefits, unlike most people nowadays.

Some questions to consider:
You have factored in inflation? At least 3-4% annually? A equal/higher level of income tax than you have now? What are you assuming for the cost of medical (both insurance premiums and non-reimbursed/co-pay expenses? Long term care? Vision/dental?

Will the 529 funding cover graduate school for both daughters?

Any need to take care of elderly relatives or siblings?

***

We have not found our expenditures to be "even" in retirement; e.g., no real change from working days. House maintenance costs continue to rise, property taxes and insurance premiums and utilities increase, cars die, roofs leak, food costs more and more.

In the "active" phase of retirement, costs often go UP. That's what we've found. Want to travel, dine out, take up new hobbies? All it takes is money, because you've got a lot of time to fill.

You are to be congratulated for doing an exceptional job of saving money. You do need to make certain that you pay attention to keeping your legal and financial planning up to date, because of your successful accumulation of assets.

Having money as you age, gives you options. With the gradual but steady gutting of federal/state/city social programs, having those options in an uncertain future will be increasingly important.

Well, I'm in my mid-30's with a half-million dollar net worth and no debt except for a mortgage that will be paid off in 3 years. I have tens of thousands in cash savings and hundreds of thousands in retirement savings. I'd say my plan of taking it "slow and steady" is playing out pretty well, wouldn't you agree?

Why should I take huge risks and "swing for the fences" when I can take the low-risk route that's been working well for me so far?

Someone who's in a hurry to retire at 35 is someone who is either lazy or hates their job. And the only way to retire so young is by taking big risks. Why not instead find a job you enjoy, and take the low-risk route to riches? It takes a few more years, but if you enjoy your job, who cares?