Author Topic: Article: You may be saving too much for retirement  (Read 7594 times)

Ohio Teacher

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Article: You may be saving too much for retirement
« on: January 06, 2014, 05:50:26 PM »
http://finance.fortune.cnn.com/2014/01/06/jean-chatzky-retirement/?source=cnn_bin

It starts off benign:
For people who think they need $1 million but find they only need $800,000, it is a big difference.... There has long been a rule of thumb that says you should plan to replace 70% to 80% of your pre-retirement income (that is, your final annual salary before you retire) in retirement -- and that that number should be adjusted upward, with inflation, each year. In real life, data from the Survey of Consumer Finances shows, spending, and therefore the amount you'll need, isn't that linear.

So far, so good.  Surely they're pointing out that people work too long to reach those lofty goals and they should retire earlier.  Nope.

Of course it pays to figure out if indeed you're over-saving. That would free you up to use the money in the present, whether you put it toward defraying student loan debt for your kids or enjoying yourselves. Blanchett recommends a personal touch. "Nothing can substitute for spending five hours with a CFP," he says.

Wow.  And here I thought it was going to be a Mustachian article at first and it turned out to be advice to spend more and hire a dreaded financial "expert."  Not one mention of working fewer years, only saving less.  Ahhhhhh!

Random Hangers

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Re: Article: You may be saving too much for retirement
« Reply #1 on: January 07, 2014, 02:08:15 PM »
I've noticed people generally react poorly to the idea of retiring early. Must be tied up into the typical perception of retirement, that you're just sitting around doing nothing and not actively contributing to society. Or it's the jealousy thing, that you haven't yet "paid your dues" (even when you have).

Anyway, I imagine that's why the article took that slant. Which is unfortunate because I generally like that Jean C lady. Thanks for sharing.

arebelspy

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Re: Article: You may be saving too much for retirement
« Reply #2 on: January 07, 2014, 02:45:15 PM »
I am definitely saving too much.

...if my goal were to retire at 65.

If I kept working that long, saving what I am, I'd end up with somewhere between 30 and 50 million, depending on future returns.

Pass.
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wtjbatman

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Re: Article: You may be saving too much for retirement
« Reply #3 on: January 07, 2014, 06:45:54 PM »
I am definitely saving too much.

...if my goal were to retire at 65.

If I kept working that long, saving what I am, I'd end up with somewhere between 30 and 50 million, depending on future returns.

Pass.

But look at it this way, if you did do that, and you believe in an afterlife, you could smile down from heaven as you watch how appreciative your children/grandchildren are for you leaving them such a huge fortune... and hope they don't blow through the money in a generation.

dragoncar

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Re: Article: You may be saving too much for retirement
« Reply #4 on: January 07, 2014, 07:08:34 PM »
I am definitely saving too much.

...if my goal were to retire at 65.

If I kept working that long, saving what I am, I'd end up with somewhere between 30 and 50 million, depending on future returns.

Pass.

But look at it this way, if you did do that, and you believe in an afterlife, you could smile down from heaven as you watch how appreciative your children/grandchildren are for you leaving them such a huge fortune... and hope they don't blow through the money in a generation.

What?  I'm going to be buried with my money and put a curse on the coffin.

wtjbatman

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Re: Article: You may be saving too much for retirement
« Reply #5 on: January 07, 2014, 07:49:16 PM »
I am definitely saving too much.

...if my goal were to retire at 65.

If I kept working that long, saving what I am, I'd end up with somewhere between 30 and 50 million, depending on future returns.

Pass.

But look at it this way, if you did do that, and you believe in an afterlife, you could smile down from heaven as you watch how appreciative your children/grandchildren are for you leaving them such a huge fortune... and hope they don't blow through the money in a generation.

What?  I'm going to be buried with my money and put a curse on the coffin.

Future archaeologists announcing their find...
"Ancient Mustachian Tomb Uncovered... shocking secrets revealed! He was buried in a homemade coffin along with his hemp shoes, flannel shirt, and a whole stack of fund summaries from Vanguard."

Zamboni

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Re: Article: You may be saving too much for retirement
« Reply #6 on: January 07, 2014, 10:50:26 PM »
I had a "financial expert" tell me this . . . to my face.  So I pulled everything out of the accounts he was "managing" and switched to Vanguard.  Problem solved.

LalsConstant

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Re: Article: You may be saving too much for retirement
« Reply #7 on: January 09, 2014, 02:27:32 PM »
I am going to be the devil's advocate here.

When I first started to climb out of debt, I tried 2 or 3 budgets and couldn't stick to any of them longer than a month.  The last one I made though, the one that "took", involved my setting myself a certain amount of money I was allowed to just blow on stupid things.  At the time it was several hundred bucks, far, far too high.

But the trick is, that safety valve, that pressure release, was ultimately what kept me on budget.

For one thing, I could have an unexpected tsmall expense and roll with it.  I just bought one less stupid thing that month.  It kept me from freaking out every time a $30 charge wrecked my budget category like it had in previous attempts, I didn't get discouraged any more.

For another, it builds slack into the budget.  For instance this month I unexpectedly bought some detergent and antifreeze in (relative) bulk.   But I didn't budget for that.  But that's okay, because my "blow money" is going to absorb it.  That's my "fun" for this month, humorously enough.

And finally, the best benefit of it is that over time, I've learned that spending $400 on silly stuff is every bit as satisfying as spending only $350 as $200 as $150 and so on.  It just keeps shrinking but the amount of enjoyment stays about the same.  In fact it increases, because now I spend it on the things that really do give me the most pleasure. 

Psychologically, it makes a huge difference for me.  I know that if I die in a freak accident tomorrow, I will actually have enjoyed my money while I had it.  If I'd never willingly comitted to actually blow through a small portion of cash, I never would have learned to try to save the bulk of it.  It has gotten to the point where what I waste is purposeful and it is two orders of magnitude less than what I'm saving and investing.

arebelspy

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Re: Article: You may be saving too much for retirement
« Reply #8 on: January 09, 2014, 04:05:04 PM »
I know that if I die in a freak accident tomorrow, I will actually have enjoyed my money while I had it.

I don't understand this, personally.  If I die tomorrow, I'll have been very satisfied with the money choices I made, and enjoyed my money (while saving 70%+).  Spending any more wouldn't have made me any happier...
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LalsConstant

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Re: Article: You may be saving too much for retirement
« Reply #9 on: January 10, 2014, 06:58:35 AM »
That's cool.  But with all due respect I have learned that trying to force other people's standards on my own life and actions is the path to misery for me personally.  It has gotten me in trouble before.

I am just all about trying to do better as I go any more.  I realize that's not the focus of MMM but I keep finding ways to apply the principles discussed here so there you go.

arebelspy

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Re: Article: You may be saving too much for retirement
« Reply #10 on: January 10, 2014, 07:28:42 AM »
That's cool.  But with all due respect I have learned that trying to force other people's standards on my own life and actions is the path to misery for me personally.  It has gotten me in trouble before.

Oh absolutely.

Fuck other people's expectations, do what makes you happy.

I was just questioning the "spending money makes me happy" part of that, if that really does make you happy.
We are two former teachers who accumulated a bunch of real estate, retired at 29, and now travel the world full time with two kids.
If you want to know more about me, or how we did that, or see lots of pictures, this Business Insider profile tells our story pretty well.
We (rarely) blog at AdventuringAlong.com. Check out our Now page to see what we're up to currently.

LalsConstant

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Re: Article: You may be saving too much for retirement
« Reply #11 on: January 10, 2014, 07:41:29 AM »
Amazingly, a little bit of it does.

For example, I have been following for some time now the blogs of several people who travel inexpensively by living in their vehicles for the duration of the trip.

That's something I want to try, but I need to acquire a few items for it first (most recommend a cooler at least for the food, and so on).  So I'm stashing away some money for that every month from the blow money.

I have discovered a great personal love for independent computer games, the kind literally made in a garage or a tiny studio by freelancers.

While the library is cheaper, I find I love the convenience of the Kindle.  I don't really spend much if anything on books since so many Kindle books are free, but that was an impulse purchase I made that I don't regret at all.

I saw an old friend for the first time in several years a while back, and I took him to a famous local BBQ pit.

These are all wasteful purchases, but I don't regret any of them.  To quote Roald Dahl, a little nonsense now and then is cherished by the wisest men.

arebelspy

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Re: Article: You may be saving too much for retirement
« Reply #12 on: January 10, 2014, 07:45:17 AM »
Sure, all of those are great. 

The Kindle can check out books from your library without leaving home, so don't forget that.
We are two former teachers who accumulated a bunch of real estate, retired at 29, and now travel the world full time with two kids.
If you want to know more about me, or how we did that, or see lots of pictures, this Business Insider profile tells our story pretty well.
We (rarely) blog at AdventuringAlong.com. Check out our Now page to see what we're up to currently.

No Name Guy

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Re: Article: You may be saving too much for retirement
« Reply #13 on: January 10, 2014, 11:16:40 AM »
I know that if I die in a freak accident tomorrow, I will actually have enjoyed my money while I had it.

I don't understand this, personally.  If I die tomorrow, I'll have been very satisfied with the money choices I made, and enjoyed my money (while saving 70%+).  Spending any more wouldn't have made me any happier...

I'm not picking on you LalsConstnt, since you clearly have your "fun" money under control....

This point, the "what if I die tomorrow" point, that so many people use to justify blowing ALL their money just mystifies me and makes no sense once the odds are examined.  I'm had a bit of math over the years and tend to try and do the "smart" thing, so I play the odds.  The odds of me dying tomorrow (or even at any time this year) are pretty darn small for young adults on up well into middle age (and for that matter, aren't all that bad even into the 70's).

http://www.medicine.ox.ac.uk/bandolier/booth/Risk/dyingage.html

Quote
These [chances of dying] have been [calculated] to show the results as an annual risk - a chance of 1 in X of dying in the next year (on average), by your age and by your sex.

For 25-34 year old men in the UK, it's 1 of 1215.  For the ladies, it's 1 of 2488.
For 35 to 44 year old men, it's 1 of 663 and for the ladies, it's one of 1106.

So, next year, for every 1215 young (25-34 y/o) men out there today, chances are that there will still be 1214 of them.

To maximize my happiness (e.g. NOT have to work in a few years since I'll be FI) I'll play that small chance that I don't make it, since the overwhelming odds are, that I WILL make it for those few more years to hit FI, and the not blowing all my money on hookers and blow today like a Goldman banker will provide a massive return on my happiness in a few years. 

LalsConstant

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Re: Article: You may be saving too much for retirement
« Reply #14 on: January 17, 2014, 09:28:33 AM »
No Name that is bloody brilliant!

Actual odds of death being used as a budgeting formula o constraint is a stroke of genius.

rockstache

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Re: Article: You may be saving too much for retirement
« Reply #15 on: January 17, 2014, 10:14:21 AM »
Sure, all of those are great. 

The Kindle can check out books from your library without leaving home, so don't forget that.

I knew this already, but thanks for the reminder. Every time I rediscover the Kindle section its like a whole new world (most times it actually is because they update it quite often).

Jamesqf

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Re: Article: You may be saving too much for retirement
« Reply #16 on: January 17, 2014, 12:29:18 PM »
This point, the "what if I die tomorrow" point, that so many people use to justify blowing ALL their money just mystifies me and makes no sense once the odds are examined.

Not even the odds of dying with unspent money, because I wouldn't be enjoying myself any more if I did spend more money.  At least in reasonable amounts - maybe if I could afford Rent-A-Harem or something similar.

prodarwin

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Re: Article: You may be saving too much for retirement
« Reply #17 on: January 17, 2014, 12:55:23 PM »

To maximize my happiness (e.g. NOT have to work in a few years since I'll be FI) I'll play that small chance that I don't make it, since the overwhelming odds are, that I WILL make it for those few more years to hit FI, and the not blowing all my money on hookers and blow today like a Goldman banker will provide a massive return on my happiness in a few years.

Just curious, do you factor in disability?

My parents are 59 (dad) and 60 (mom).  They are retired and quite well off.  However, my father has myotonic dystrophy and is unable to enjoy probably 95% of the activities I (and most people) enjoy doing.  I'm sure if you asked him "If you could go back and spend more time and money enjoying life and less saving for the future, would you?", the answer would be "Yes".



No Name Guy

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Re: Article: You may be saving too much for retirement
« Reply #18 on: January 17, 2014, 02:58:45 PM »
pro:  Sure, in a manner of speaking I've taken it into consideration.  I haven't looked up what the specific odds are of a XX year old  in my general situation (eg over all health, activity, occupation, etc) has of becoming disabled in the next YY years are. 

But from my circle of friends, family and acquaintances, the odds of becoming disabled are not all that high - as in I don't know anyone who is or has become disabled in any significant manner*, and certainly not to the point of not being able to do 95% of activities.  And again, I'm about playing the most likely odds - if I DID become disabled, you can bet the after the fact wish is that I would have done what I could have done, cost be damned.  But even if that happens, I know I'm just the unlucky one and that I still made the smart move.  So I'm not going to blow it all today on the off chance I'll be disabled and unable to enjoy it tomorrow.

Ok - after I wrote that, I did just think of one guy I know.  A terrible, shitty situation.....blinded in a boat accident.  But he had been drinking (I believe) and was driving the boat at high speed at night before crashing into something he didn't see.  I don't high speed boat at night, so I think my odds of taking a face full of glass going through the windshield are pretty low.

AlmostIndependent

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Re: Article: You may be saving too much for retirement
« Reply #19 on: January 17, 2014, 09:17:35 PM »
What?  I'm going to be buried with my money and put a curse on the coffin.

Yes.

steveo

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Re: Article: You may be saving too much for retirement
« Reply #20 on: January 17, 2014, 10:18:21 PM »
Spending any more wouldn't have made me any happier...

I totally agree with this. I don't get how spending more money makes you happier. I don't think it does.

mpbaker22

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Re: Article: You may be saving too much for retirement
« Reply #21 on: January 18, 2014, 04:29:58 AM »
I know that if I die in a freak accident tomorrow, I will actually have enjoyed my money while I had it.

I don't understand this, personally.  If I die tomorrow, I'll have been very satisfied with the money choices I made, and enjoyed my money (while saving 70%+).  Spending any more wouldn't have made me any happier...

If I die tomorrow, I'll be happy that neither of my younger sisters will be graduating with student loan debt and both will have at least a full years of non-mustachian expenses paid for.  Let's just hope they don't spend it like non-mustachians!  And I suppose that doesn't count the 2.25x my annual salary since my work pays for that in life insurance ... what a useless benefit from my perspective.

AlmostIndependent

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Re: Article: You may be saving too much for retirement
« Reply #22 on: January 18, 2014, 08:34:24 AM »
what a useless benefit from my perspective.

I tend to agree.