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Too aggressive in saving for retirement?

Dr. J 25,041 3,353 September 7, 2015 at 06:13 PM
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We all talk about saving for retirement and it's always about not saving enough but today I had to step back and ask myself if I was trying to save too much?

It started a few months ago when I posted here about a HDHP option that was too good to be true and the discussion turned to how an HSA is essentially a traditional IRA once you reach retirement age (65 meaning it's like normal income) but has the bonus of retroactive withdrawals (e.g. save all your receipts and take the $$ out once it's grown a few times) - all you have to do is treat the HSA as if it weren't accessible (for, you know, what it's meant for). I quickly jumped on this and augmented my wife's withdrawals to max out the HSA (her employer is putting in over 50% of the current federal max).

The thing is, with premium differences vs the PPO (we'd been on for many years) and not being able to use the FSA, I wasn't able to "compensate" for these "lost pre-tax deductions" without augmenting her existing 403b so my plan was to start a post-tax vehicle like a Roth IRA. (In other words, our pretax income will increase as well as post-tax).

That's when the thought ran though my mind.... are we saving too much? We sure could use some more pocket cash right now, and I already max out my 401k, she has a 403b she puts into as well as a state pension (teacher) (however to value that). According to just about any metric I can find, we are well ahead of the game not even considering the recent HSA development.

Just wondering if I got too caught up in the savings mantra to take a look at the real state of things.

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#2
Retire!- the sooner, the better. Be sure you understand that "retirement" doesn't necessarily mean you stop working, it just means having the freedom to do what you want to do, when you want to do it.
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#3
FYI, There isn't an answer we can directly give you. You will have to determine the outflow of retirement cash to maintain the lifestyle you want. You will be drawing your accounts down in retirement and they need to last you. Do you need $50k a year, $100k a year, or another figure?

There really isn't many situations where you are putting "too much" into retirement. If you are really hurting yourself by not having the money then you could ease back. Especially if you are maxing your 401k at $17,500 along with other retirement investments.

The rule of thumb is you want to invest at least 15% of your income into retirement. So calculate what you're doing and see where you are at. Now if you want to eat caviar and drive a Ferrari then you need to be aggressively working towards that lifestyle.

Also remember that along with retirement should come the dwindling of debt. If you have a lot of debt left you need to plan on timing the debt payoff with retirement so you aren't putting your retirement money towards debt (which I argue is not a smart plan).

Good luck to you.
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#4
Quote from eekthecat View Post :
FYI, There isn't an answer we can directly give you. You will have to determine the outflow of retirement cash to maintain the lifestyle you want. You will be drawing your accounts down in retirement and they need to last you. Do you need $50k a year, $100k a year, or another figure?

There really isn't many situations where you are putting "too much" into retirement. If you are really hurting yourself by not having the money then you could ease back. Especially if you are maxing your 401k at $17,500 along with other retirement investments.

The rule of thumb is you want to invest at least 15% of your income into retirement. So calculate what you're doing and see where you are at. Now if you want to eat caviar and drive a Ferrari then you need to be aggressively working towards that lifestyle.

Also remember that along with retirement should come the dwindling of debt. If you have a lot of debt left you need to plan on timing the debt payoff with retirement so you aren't putting your retirement money towards debt (which I argue is not a smart plan).

Good luck to you.

Most metric go something like "if you make $X and are of so-and-so age, you should have $Y in retirement accounts". These are generalizations, yes, and mostly assume the "same standard of living" in retirement (although I'm not convinced that most make the assumption that many of your current expenses won't be an issue by the time you retire, like student loans, mortgages and such). But how do you evaluate a pension when it's so far out? Any kind of assumptions made would be very specious.
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#5
The pension plan will have a formula for calculating benefits. It's based on years contributed to the plan. You can estimate a rough monthly amount. It shouldn't be too far off. This is all assuming the pension is viable at the time of retirement. Your wife can get pension information from her employer that gives payout calculations as part of retirement planning.

As for expenses, you should be absolved of debt by retirement but interestingly enough a lot of people's expenses go up. These are your years for traveling and buying stuff just for fun. If you still have debt paying off close to retirement, those funds shift to cover some of this.

The main thing to consider is how much you are taking out each year and for how many years. Also with withdrawals is that the interest income will also shrink dramatically as you get further along.

If you need $100k a year to maintain retirement lifestyle, and you only have $1mil, that equates to about 10 years of living give or take. This would clearly not be feasible if you live longer.
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#6
I usually see the 15% figure suggested in reference to this article: The Shockingly Simple Math Behind Early Retirement [mrmoneymustache.com] which claims that 15% saved for 43 years is enough for a person to withdraw 4% every year afterwards. This would mean that a 22 year old could retire at 65 if they save 15% every year.
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#7
Quote from Dr. J View Post :
According to just about any metric I can find, we are well ahead of the game not even considering the recent HSA development.
It most definitely is a game and most people never stop and readjust the goal posts. I do spread things out myself, but then make really aggressive moves if the situation calls for it. I have 45% of my "retirement savings" allocated to equities in one single stock. Most would say that's idiotic. Smilie
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#8
While saving enough for retirement is definitely very important and most don't do it enough, I think it's just as foolish to not enjoy life to the fullest today by telling yourself you'll enjoy life more later.

Many people have run into unforeseen horrible accidents and medical issues and realized they never got to live their life because they were so busy preparing for a future life they no longer will have.

Love your life now... if you have to cook at home occasionally instead of eating out 3 meals / day when you're older I think that's a fair trade-off. If you're worried you might be saving too much my guess is you almost definitely are.
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#9
I agree that there should be a balance. Money is just part of the equation. My wife and I had long discussions about this. Saving should not be a burden, hobby or obsession. It shouldn't get to a point that it's ruining the ride or stressing about every financial decision you make. I think part of it has to do with both of us being healthcare providers and it's sad what you see day in day out. Also medical related scares in the past. Sometimes life is unpredictable and unfortunate. At the same time I don't need a McMansion, brand new luxury cars, staying in 5 star hotels, excessive toys or eating at high end restaurants every weekend. I also stress optimizing your health is vital with good nutrition, adequate exercise, good sleep, reduced stress and regular checkups with your physicians. But yeah enjoying life now is definitely a priority. We treat time and money as tools right now, in the short term and the long term.
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#10
It rather feels like it's becoming a hobby or obsession.... like seeing those balances rise!
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#11
Quote from Bania View Post :
It most definitely is a game and most people never stop and readjust the goal posts. I do spread things out myself, but then make really aggressive moves if the situation calls for it. I have 45% of my "retirement savings" allocated to equities in one single stock. Most would say that's idiotic. Smilie
Is it brk.a/b? Smilie
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#12
Its better to have health insurance than HSA

HSA is not going to cover $100,000 2 day stay in hospital
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#13
Quote from narnaie View Post :
Its better to have health insurance than HSA

HSA is not going to cover $100,000 2 day stay in hospital
? You seem to be confusing HSA with not having insurance. The opposite is true - to have an HSA you have to have a HDHP insurance plan, so yes we do have health insurance.

I went through this in another thread - changed from a PPO to a HDHP with the same network of Dr's - premiums went down about $2060 a year, employer gives $3750 into a HSA where the deductible and max OOP of the plan is $5000/yr (in-network). Any way you cut it we are at least ~$800 in the black regardless of how much healthcare we use, and at best +~ $5800 if we don't use any healthcare. That doesn't include the tax benefits of the HSA itself.
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#14
some days I think I oversave for retirement. some days I think I undersave for retirement. but reality is I save enough because I'm comfortable with my current lifestyle and my retirement planning.
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#15
Quote from Dr. J View Post :
We all talk about saving for retirement and it's always about not saving enough but today I had to step back and ask myself if I was trying to save too much?
Based on your current posts the obvious answer is no. Nevermind the fact that you don't know how old you're going to be when you die, what your medical health will be, and how our economy will be 10, 20, 30+ years from now. IOW save as much as you can man!
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