Are you saving too much for retirement?

[QuarterMillionMan]

5 Signals You are SAVING TOO MUCH for Retirement - YouTube

At 55 soon to be 56 w/a net worth of $700,000 and a measly pension I wish I could yes I'm saving too much for retirement. Now if I had double or triple my current net worth then I might be saving too much for retirement but I'm not there yet. Can anyone say that they are saving too much for retirement? That would be a good problem to have.

[kork13]

Around 2019-2020, I did feel that we were saving too much into retirement. As noted in the video, for me it was a matter of missing other targets -- namely, having enough to buy our next (current) house.

At the time, I was maxing out our retirement accounts, but DW had just been medically retired from the military, so our income had dropped by >40%. When that happened, we kept the retirement contributions at the same dollar level (which was ~25% of gross). So we were getting pinched trying to still save in taxable accounts, which is where we stash cash for big purchases.

So we reduced our retirement contributions to 15% and diverted the rest to taxable accounts for about 2 years. We eventually got to the point we were able to (barely) buy our current home in cash. As a result our cashflow is alot more flexible, and we eventually went back to maxing out the retirement accounts. However, the balance between taxable vs retirement is much better (taxable actually gets more than retirement now).

[disneysteve]

Didn’t watch the video (I prefer to read) but if you over-save, that just allows you to retire earlier, which is a good thing. Now if you’re living a miserly meager existence to put away every penny that’s a different sort of problem.

I don’t think we saved too much. I’m 57 and all projections say I can retire today and be fine if we both live to 95. It has allowed me to switch to part time and be able to pull the plug fully whenever I decide it’s time.

[kork13]

if you over-save, that just allows you to retire earlier, which is a good thing.

Agreed, though I'll add the caveat that if you're looking at 'retiring' very early (ex: in your 40s), over-saving in qualified retirement accounts can be a problem (and was/still is another concern for me). You end up with all of your money locked up in IRAs & 401k's, and you don't have enough saved in taxable, accessible accounts to live off of.

That's why we're putting emphasis on building up our non-retirement investments & RE portfolio -- to provide us with the money that we'll need/want once I retire from the military.

[Scallywag]

Did not watch the video but that would be a wonderful "problem" to have, especially if you're also enjoying a good life in the here and now!

We are late starters to the retirement / saving journey and it's made me worry that we may struggle later on, especially with our son's unusually long "retirement" years even after we're gone (we're saving for about 60 years of living on no income, in total, 20 years for us and an additional 40 years for him after our time). Plus we're renting. We have our emergency savings goal met, so in 2022, we may focus even more on saving on our down-payment which will help us get into a home faster. I think not having a rent / mortgage will make a huge difference in retirement, esp in a LCOL / MCOL area. We'll see.

Even if we were financially independent now, and never had to worry about "retirement" or our son's future without us, I believe that - for me - there would never have been such a thing as having "too much money". Money equals financial freedom for yourself, your spouse, and your "heirs" to choose to live a good life doing things that matter to you (volunteering / working a job that gives you a sense of accomplishment / "fulfillment" even if lower paying as opposed to working a job that drains you but helps you pay your bills etc) or in my son's case the ability to live a dignified life with a roof over his head and food on the table, even if he is unable to work for a living due to his significant disability.

In fact, I have been advising my daughter / nephews / nieces to get a "head-start" on working and retirement so that they meet their monetary goals while still relatively young and then FIRE in their 40s. Work at those "boring, high paying" jobs starting in your early 20s, FIRE by your early 40s, and then do whatever they want for the rest of their lives, whether that's stand-up comedy or painting all day or volunteering at a local non-profit, knowing that they have the first world problem of having "too much for retirement", both in terms of time and money.

[disneysteve]

Agreed, though I'll add the caveat that if you're looking at 'retiring' very early (ex: in your 40s), over-saving in qualified retirement accounts can be a problem (and was/still is another concern for me). You end up with all of your money locked up in IRAs & 401k's, and you don't have enough saved in taxable, accessible accounts to live off of.

Very true. Fortunately we've got a very diverse portfolio split pretty evenly between retirement and non-retirement accounts. Also, I'm going to be 58 (if I stick it out that long) so it won't be long before we can tap the retirement funds too if needed. But we'll have enough in non-retirement accounts to sustain us for years.

[Scallywag]

Agreed, though I'll add the caveat that if you're looking at 'retiring' very early (ex: in your 40s), over-saving in qualified retirement accounts can be a problem (and was/still is another concern for me). You end up with all of your money locked up in IRAs & 401k's, and you don't have enough saved in taxable, accessible accounts to live off of.

That's why we're putting emphasis on building up our non-retirement investments & RE portfolio -- to provide us with the money that we'll need/want once I retire from the military.

Yes, but that's only if you retire in your 40s and have money in a/cs that you cannot access without penalties until you turn 59-and-a-1/2. If you retire in your 60s that is not a problem at all.

But I am curious, how do you determine how much to put in stock & bond investments and how much to save for a house / real estate?

[kork13]

But I am curious, how do you determine how much to put in stock & bond investments and how much to save for a house / real estate?

For myself, it's really one and the same. We save up for our next RE purchase in taxable investments, so everything goes to that. Once we have enough money in there to buy another rental, we'll start actively shopping for it. Whatever remains will stay in the taxable investments & we'll start over with building them up.

In the long term, our goal is to roughly have our taxable investments & RE roughly equal in value -- at least $500k in RE & $500k in taxable investments. That'd give us roughly $25k-$30k/yr in net RE income (profits), which would provide for the rest of our income needs (above DW's & my military pensions). The investments would then just cover big purchases as desired, and DW & I can choose to work, or not, as desired. Not certain that I'll be able to get there in the next 7 years before I retire... but it's a goal to reach toward.

[Petunia 100]

Yes, but that's only if you retire in your 40s and have money in a/cs that you cannot access without penalties until you turn 59-and-a-1/2. If you retire in your 60s that is not a problem at all.

But I am curious, how do you determine how much to put in stock & bond investments and how much to save for a house / real estate?

There are ways to access your money prior to 59.5 with no penalties. Google "72t rules" and "Roth conversion ladder", which are two distinct strategies.

[QuarterMillionMan]

Any amount would be too much if you die before you can withdraw it. In which case you should have eaten steaks and lobsters and king crab legs every night with it but therein lies the problem not knowing when you’ll die.

[disneysteve]

Any amount would be too much if you die before you can withdraw it. In which case you should have eaten steaks and lobsters and king crab legs every night

Except then you would have died even sooner.

[ua_guy]

At 40-ish, I don't know. It's a question I've been trying to answer for a number of years. Just picking round numbers, if we have $2.5M now but half is split between retirement and the other half between a home and some cash, then I'd say no. We look at our home as a way to bridge the gap between "retirement age" and maybe turning down the volume and stress on work between early 50's and 60's. But that's narrowing because the price of real estate is insane, seemingly everywhere we'd want to settle down for retirement. And there's a big wildcard ahead--what I find/decide to do for work next.

So I think it really depends on the next 10 years and the projections that start coming out of that. We plan to continue saving aggressively. Almost 10 years ago we met with a true financial planner, "fiduciary" and things were roughly in-line and we were making good progress towards our goal. Ultimately I think we are benefited by seeking a lower cost of living (real estate) but that's very hard to do with a lot of uncertainty ahead. DH's career is ultimately benefited by another jump in a few years and that may change where we live, again.

[bjl584]

Agreed, though I'll add the caveat that if you're looking at 'retiring' very early (ex: in your 40s), over-saving in qualified retirement accounts can be a problem (and was/still is another concern for me). You end up with all of your money locked up in IRAs & 401k's, and you don't have enough saved in taxable, accessible accounts to live off of.

That's why we're putting emphasis on building up our non-retirement investments & RE portfolio -- to provide us with the money that we'll need/want once I retire from the military.

This.

I want to retire early, and one of my main concerns is to have enough money and cash flow coming from non retirement accounts.

[rennigade]

This.

I want to retire early, and one of my main concerns is to have enough money and cash flow coming from non retirement accounts.

Why from non retirement accounts? There's already been scenarios and calculations done that show even after taking the 10% penalty from early withdrawal from a 401k is still better than pulling money from taxable accounts. Don't be afraid of that 10% penalty. Because a 401k is pre tax, you can invest much more than your post tax accounts. That's to say you have access to a 401k through employer. Some people don't have that luxury.

MOney is money. The older I get the more valuable time gets. I never understood that when I was younger. Is saving $5k in penalties after withdrawaling $50k from a 401k worth a year of your life? Is it really worth working 1 more year just to save $5k?

[Singuy]

What is the general consensus now? I heard the 4% rule doesn't work for young people. Are people using the firecalc instead? How would you know you have saved too much?