Saving more than you need

[force majeure]

http://www.marketwatch.com/story/how-saving-too-much-can-make-your-retirement-less-satisfying-2016-07-13?siteid=yhoof2&yptr=yahoo

Interesting ideas in this article. Makes you think, are we sometimes overdoing the savings rate.

[cheapass]

... not sure how saving too much and retiring extra early is in any way a bad thing.

[2Birds1Stone]

I thought it was an interesting read, but as armueller pointed out........this is not aimed towards people looking to FI, RE or both.

The general consensus on these boards is in line with the article......once you win the game enjoy your life and stop working.

Keeping a 50% savings rate and working for 40 years makes no sense unless you want to die very rich.

[Giro]

Keeping a 50% savings rate and working for 40 years makes no sense unless you want to die very rich.

I don't know if that's always true.  There's a point where spending more than 50% doesn't make you any happier and actually might be more stressful.  Saving 50% and living on a few hundred thousand a year for 40 years may very well make you just as happy as spending all of your money and working for 40 years. 

[2Birds1Stone]

Good point Giro, but if you are in that position then you may as well stop working sooner too.

[franklin w. dixon]

I've thought about this a bit with regard to savings in tax-advantaged accounts; basically my reasoning is that there's no reason for me to lock up money for tax deductions if I will never need it or spend it. My rough estimate is that I'll be very safe if I have $1,000,000 in current dollars when I'm 65. Assuming a 4% real rate of return, and given that I'm 29, that means if I had $244,000 in such accounts today (I don't) I would not need to add any more. Obviously, if market returns are lower than I expect, I could add more later as needed.

I understand Roth conversion and of course the reasoning that's like, why not make sure you have as much money as possible when you're old, but once retirement is secure I don't mind paying higher taxes in exchange for having more money in the present.

It's also not a question that will be relevant for quite some time since in reality I only have like 30k in tax-protected accounts. But in 10 or 20 years I could easily be like "well the amount of money is 'plenty' so I'm not even gonna worry about it." No reason to pre-fund the pension plan out to 500 years.

[tooqk4u22]

http://www.marketwatch.com/story/how-saving-too-much-can-make-your-retirement-less-satisfying-2016-07-13?siteid=yhoof2&yptr=yahoo

Interesting ideas in this article. Makes you think, are we sometimes overdoing the savings rate.

Guilty - this one statement resonates with me

The people who are most effective for saving for retirement — who live frugally and manage to save a big piece of their income — get that so ingrained into their behaviors that by the time they retire with their healthy nest egg, they can’t turn the switch

I am/will struggle with OMY as I struggle to accept that I won't have additional savings and even worst that I may be drawing down balances.  Since I was a teenager I have always operated under the premise that once it went into savings/investment it was gone.   If I needed to buy/do something large, such as buy a car or trip or something costly for the kids, then I would simply reduce adding to savings and not take from savings and in some cases would use HELOC or credit card to bridge the gap and then pay it off rather quickly - advantage of having high savings rate. 

That is a real psychological issue for me to get comfortable with.

[cheapass]

I've thought about this a bit with regard to savings in tax-advantaged accounts; basically my reasoning is that there's no reason for me to lock up money for tax deductions if I will never need it or spend it. My rough estimate is that I'll be very safe if I have $1,000,000 in current dollars when I'm 65. Assuming a 4% real rate of return, and given that I'm 29, that means if I had $244,000 in such accounts today (I don't) I would not need to add any more. Obviously, if market returns are lower than I expect, I could add more later as needed.

I understand Roth conversion and of course the reasoning that's like, why not make sure you have as much money as possible when you're old, but once retirement is secure I don't mind paying higher taxes in exchange for having more money in the present.

It's also not a question that will be relevant for quite some time since in reality I only have like 30k in tax-protected accounts. But in 10 or 20 years I could easily be like "well the amount of money is 'plenty' so I'm not even gonna worry about it." No reason to pre-fund the pension plan out to 500 years.

Are you planning on retiring early? If so, paying unnecessary taxes by not utilizing tax advantages accounts will mean more years working.

[franklin w. dixon]

I've thought about this a bit with regard to savings in tax-advantaged accounts; basically my reasoning is that there's no reason for me to lock up money for tax deductions if I will never need it or spend it. My rough estimate is that I'll be very safe if I have $1,000,000 in current dollars when I'm 65. Assuming a 4% real rate of return, and given that I'm 29, that means if I had $244,000 in such accounts today (I don't) I would not need to add any more. Obviously, if market returns are lower than I expect, I could add more later as needed.

I understand Roth conversion and of course the reasoning that's like, why not make sure you have as much money as possible when you're old, but once retirement is secure I don't mind paying higher taxes in exchange for having more money in the present.

It's also not a question that will be relevant for quite some time since in reality I only have like 30k in tax-protected accounts. But in 10 or 20 years I could easily be like "well the amount of money is 'plenty' so I'm not even gonna worry about it." No reason to pre-fund the pension plan out to 500 years.

Are you planning on retiring early? If so, paying unnecessary taxes by not utilizing tax advantages accounts will mean more years working.

I dunno but I guess it's not relevant for the time being because for now I'm putting max contributions in tax advantaged accounts so that's also part of what I'll have to decide in like 10+ years.

For several years I thought that I would but now I'm trying to build a rental property business so if that works out I dunno if I'll want to just sell everything.

[RFAAOATB]

Why do all these articles presume that you want to spend down your retirement?  Are they assuming we won't have heirs and want to leave an inheritance?  Once you got your needs taken care of for the rest of your life, its time to start thinking about dynastic wealth.

Regretting you said no on the Euro-tour with first class tickets you could have afforded or working five years longer than you could have retired are valid concerns, but when most of the time I read about people woefully unprepared instead of over prepared for retirement it seems like a hard problem to take seriously.

[Prairie Stash]

I like it but the article struggled with differentiating retirees as a group and individual retirees. Its the Micro vs. Macro or Trees vs forest concept. I agree on average that people over save because they don't know their end date. On average people could spend more, also agree.

The research article its based upon addressed it better. On average a 65 year old person could use a 6% withdrawal rate and last 30 years. However its an average and not everyone wants to be on the wrong side of that average. The 4% rule is conservative, its very hard to be on the wrong side of that average (exceedingly rare since 1870). Would you rather save more to be at the 4% rule with its overly conservative nature or the 6% rule which usually works out but not always?

[Giro]

Why do all these articles presume that you want to spend down your retirement?  Are they assuming we won't have heirs and want to leave an inheritance?  Once you got your needs taken care of for the rest of your life, its time to start thinking about dynastic wealth.

Regretting you said no on the Euro-tour with first class tickets you could have afforded or working five years longer than you could have retired are valid concerns, but when most of the time I read about people woefully unprepared instead of over prepared for retirement it seems like a hard problem to take seriously.

I agree.  It seems like we are addressing a "problem" that is a very small percentage of cases.  The real problem is low savings rate for retirees. 

My mother in law used her retirement savings for a down payment on a house for my sister in law and her children to all live together with her.  Now, she can't pay the bills and is borrowing from us rather frequently.  The sister in law should be able to support herself and her children, but she's using my mother in law.  She's living on her pension and social security and has no additional savings.  I think these are the more common problems versus misers not enjoying life because they can't spend any of their earnings.