Are you saving too much for retirement?

[kork13]

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?

Firecalc is one of the better that I've played with. My thought process was that my accounts will easily grow to cover more than I would ever need in retirement. But to get there, want to have assets to support living over 15 years before we hit 59½. While 72t/SEPP is an option, it's a very restricted option. For more flexibility, you need money that's not locked up somewhere. So I need to build up a solid $500k-$1M in assets outside of retirement to supplement our other income streams.

4% rule is a simple answer, and perhaps valid. Others say 3% (or less) is better. I honestly don't know yet how we'll structure our early retirement. Right now, I'm a fan of using the profit income generated by a portfolio of rental real estate... Then there's no selling of assets, simply maintaining the rentals out of their own income.

Bottom line: Multiple overlapping streams of income. We'll have military pensions, investments, real estate, and the option of whatever work we choose, if any.

[disneysteve]

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?

Well, ultimately you won't know in advance that you've saved too much. You'll only know that after the fact when you die with a boatload of money left.

The 4% rule sort of became gospel after the Trinity study was published, but it's important to remember that it is based on a 30-year retirement, so from age 65 to 95 for example. If you retire at 60 or 55 or even younger, it doesn't actually apply. If you retire at 59 and live to be 99, 4% might not work for you.

I think Firecalc is a good tool to play around with, tweak the different variables, and see how that alters the outcomes. And always keep in mind that it's a backward-looking tool. No calculator can predict future returns, future inflation, etc. Firecalc tells you how you would have fared in the past.

The 4% rule also is based, I think, on a 70/30 portfolio. If you are at 60/40 or 50/50, that also changes the math.

As a good general rule of thumb planning tool, though, I still tell people 4% withdrawal rate or 25 times expenses (same thing just looking at it from the other direction).

[Drake3287]

I'm admittedly a little embarrassed to say I've probably saved too much for retirement, although for me, it's the fact that I already have a better than average retirement plan so saving money shouldn't have been as important. Like I've mentioned on this forum before, it's hard to go from being a saver for your entire adult life and then all of a sudden become retired and expected to spend, spend spend. Sounds like a fun easy life style but it's not.

Most people like myself find it hard to spend 30 to 40 years as an adult living within your mean's and then all of a sudden having this windfall of cash and investments. I guess it's like all of a sudden hitting the lottery and you're now expected to live in high style.

I still have the same money saving habit's that I've always had and I find myself still saving money every month for no real reason other than security. To compound the problem is Covid. It's pretty much ended any real travel plans we had and there's no real end in sight without being covid tested any where we go. I even planned to buy a vacation home but the second the pandemic hit, home prices sky rocketed 40% where we had planned to buy at. For me, I now refuse to spend $700k on a house that was only $400k a year or so ago. Not to mention the added California property taxes!

To answer the OP's original question, I guess you can save too much and of course everyone of us is in a different situation although I'd much rather be in the position I'm in now vs the opposite. I have plenty of friends that I worked with for many years and they live retirement check to retirement check simply because they never saved. No thanks.

[LivingAlmostLarge]

I'm admittedly a little embarrassed to say I've probably saved too much for retirement, although for me, it's the fact that I already have a better than average retirement plan so saving money shouldn't have been as important. Like I've mentioned on this forum before, it's hard to go from being a saver for your entire adult life and then all of a sudden become retired and expected to spend, spend spend. Sounds like a fun easy life style but it's not.

Most people like myself find it hard to spend 30 to 40 years as an adult living within your mean's and then all of a sudden having this windfall of cash and investments. I guess it's like all of a sudden hitting the lottery and you're now expected to live in high style.

I still have the same money saving habit's that I've always had and I find myself still saving money every month for no real reason other than security. To compound the problem is Covid. It's pretty much ended any real travel plans we had and there's no real end in sight without being covid tested any where we go. I even planned to buy a vacation home but the second the pandemic hit, home prices sky rocketed 40% where we had planned to buy at. For me, I now refuse to spend $700k on a house that was only $400k a year or so ago. Not to mention the added California property taxes!

To answer the OP's original question, I guess you can save too much and of course everyone of us is in a different situation although I'd much rather be in the position I'm in now vs the opposite. I have plenty of friends that I worked with for many years and they live retirement check to retirement check simply because they never saved. No thanks.

This is a wonderful problem to have. I agree though it's hard to go from living within your means to realizing your means are very large when you retire.