Saving too much?

[jdw_fire]

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Originally Posted by UncleHoney I just love this comment in the article........ “There is risk in saving too much,” Mr. Kotlikoff said. “You could end up squandering your youth rather than your money.” So you have to squander your money to enjoy it. 

Maybe we here at the early-retirement forum should look at this warning in a different light.  The squandering of youth could be accomplished by working longer than is neccessary and the saving too much could be wanting too large a nest egg before pulling the trigger on retirement.

[Mr._johngalt]

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Originally Posted by Jarhead* Sallie4: I was just going to turn in, decided to stay up for a while. Welcome to the board.

Ooh, this should be fun.

JG

[W2R]

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Originally Posted by UncleHoney I may have saved too much for retirement, but I'm not the one that will be looking for a part time job at 75 because the price of cat food just went up.

Exactly. This is a great motivation to save, as well as the desire to live somewhere other than under a freeway overpass or bridge at that age, and to have shoes that don't need to be stuffed with newspaper.

If media predictions are right, there will be plenty of other baby boomers in dire straits in 20-30 years, so why add to those numbers?

I'm sure I can think of something to do with any excess $$$ (or if not, my daughter would be glad to help me out in that endeavor).

[DangerMouse]

Quote:

Originally Posted by jdw_fire Maybe we here at the early-retirement forum should look at this warning in a different light. The squandering of youth could be accomplished by working longer than is neccessary and the saving too much could be wanting too large a nest egg before pulling the trigger on retirement.

jdw, that is a good way of looking at it, a totally different perspective than the way I read the article. One thing this article does provoke is the importance of getting a balance in your life, between having the wants in your life and saving to reach your financial goals.

[MooreBonds]

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Originally Posted by UncleHoney “There is risk in saving too much,” Mr. Kotlikoff said. “You could end up squandering your youth rather than your money.” So you have to squander your money to enjoy it. I my have saved too much for retirement, but I'm not the one that will be looking for a part time job at 75 because the price of cat food just went up.

I agree UH...I'd say that the quote from Kotlikoff is yet another sad instance of our consumerism. "If you're saving a large % of your income, it's physically impossible to be having a good time. Ergo, you are saving too much and 'squandering' your youth since you aren't spending enough, regardless of what your income/savings levels are and what your goals/needs are".

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Originally Posted by d this suggests that an individual will get more present value "utility" from current than from future consumption, which is most likely true for most all individuals. but, this fails to recognize that current savings also provides "utility". further, it fails to take into account "diminishing marginal utility".

The only problem with this is that a consumer would have to have a perfect understanding of what their utility is present-day, and estimate what their utility will be when they're 70. The problem is that most people are too short-sighted to think about how they'll pay next year's mortgage payment for life at 70, so they can't really perform a true utility comparison. They hear the ads for the latest HDTV and only think about that, and assign a utility value of "0" to having that $3,000 invested @ 7% for 30 years since many of them also don't understand compound interest (i.e. they think saving $3,000/year for 30 years isn't that much different than saving $30,000/year for 3 years in their later years).

[Donzo]

I never felt like I was saving to much or giving anything up when I was in my 20s - almost all the savings were in 401K maxed with co. match. The rest of my income was for life/buying a house and having fun. As I made more $ and had the house/toys - that $ was saved/invested. I always knew I wanted to be FI and ER but I never obsessed over it -I was to busy!
Thank God I did save "enough" though - When I burned out...it happened pretty fast 3-5 years I went from pretty happy w/ my career to numb and burnt. W/O the savings from my 20s/property bought along the way and saving of all bonuses/raises etc...I would have been SOL -

[MooreBonds]

(from the original article
From one extreme:

"Fidelity’s Retirement Quick Check calculator says that a 50-year-old person making $100,000 a year with $700,000 stashed in retirement accounts, saving $15,000 a year, would still fall short of the $2.8 million goal that would provide the necessary monthly retirement income of $7,408 that it sets. Its calculations do not include Social Security payments.

Fidelity actually recommends saving about $1,000 a month more. It also encourages this person to save more even when more than enough has been saved. It recommends putting away up to $9,749 a month on top of the $15,000 a year already being saved, an impossibility since that would more than consume the person’s entire gross income."

...to the other extreme...

"Mr. Kotlikoff’s ESPlanner software, taking real estate holdings and life insurance into account, says the person could cut back on savings by $10,000 a year and still have enough for a monthly income of $6,000 at retirement, the amount his calculations deems adequate to live on given prior consumption patterns."

Either Kotlikoff is yet another schiester (sp) or is truly ignorant. Fidelity's "Quick Check" (anyone else note the obvious in the Fidelity calculator's title? It's like comparing a raw block of marble to a Michaelangelo sculpture) simply looks at the total equivalent financial assets you'll need. Kotlikoff's program, on the other hand, apparently goes so far as to assume reverse mortgages ("taking real estate holdings") and - I think, but I'm just guessing - cashing in/loans against whole life insurance policies ("life insurance"). Sure, if you go to those extremes, I won't need anywhere near 25x income in my portfolio...because my investment portfolio will only be 2/3 of my total equivalent financial assets (the other 1/3 being a reverse mortgage and cashing in a life insurance policy). If you ask me, betting on what interest rates will be 30-40 years from now on assuming reverse mortgage cash flow would be perhaps the most difficult part of retirement planning.

Another sad quote:

"Indeed, their studies of the savings and spending habits of the generation born between 1931 and 1941 revealed that at least 80 percent had accumulated more than enough wealth for retirement."

Gee....considering that those 80% are receiving SS payments that far eclipse what they ever paid into it, I surely hope that they ended up accumulating more than enough wealth. Give me the same 5%-7% annual returns on my SS contributions that they ended up getting, and I'll be sitting pretty as well.

Again either extreme of Saving too little or saving too much is not desired.

To some posters on this forum the belief seems to be "If I buy this Flat Screen TV, I'll have to eat cat food when I'm 80" - But, if I don't buy the TV, I won't have to get a job as a Walmart greeter when I'm 70 and can eat people food".

Anyone else see happy medium here?

[bssc]

My big concern is that people like this will cause people save even less so down the road, people will have less. Then some "consumer activist" will not consider this inequal income distribution fair and want taxes on it.

While this may seem far fetch, at the recent Senate hearings, someone called for annual fees on people pay off their balances in full because it wasn't "fair". See more here http://money.cnn.com/2007/01/25/pf/c...ion=2007012612

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Originally Posted by bssc My big concern is that people like this will cause people save even less so down the road, people will have less. Then some "consumer activist" will not consider this inequal income distribution fair and want taxes on it. While this may seem far fetch, at the recent Senate hearings, someone called for annual fees on people pay off their balances in full because it wasn't "fair". See more here http://money.cnn.com/2007/01/25/pf/c...ion=2007012612

Yeah, It isn't fair to the credit card industry! This has nothing to do with fairness to the consumer, it's all about profit for the credit card companies.

The someone is paid by the credit card company!

"But in a Senate Banking Committee hearing examining credit card practices this week, one consumer advocate suggested those who pay their balances in full every month (about half of all cardholders) should pay a small annual fee to credit card companies.

[bssc]

I should add a disclaimer that I work for a credit card company. But I still think that it is a crazy idea.

[audreyh1]

Interesting article.

I like this warning Dodd issued to the credit card companies!:

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But Dodd did issue a warning to credit card companies during the hearing: "If you currently engage in any business practice that you would be ashamed to discuss before this Committee, I would strongly encourage you to cease and desist that practice. Irrespective of the current legality of such practices, you should take a long, hard look at how you treat your customers."

Audrey

[Shawn]

Quote:

Originally Posted by jdw_fire Maybe we here at the early-retirement forum should look at this warning in a different light. The squandering of youth could be accomplished by working longer than is neccessary and the saving too much could be wanting too large a nest egg before pulling the trigger on retirement.

I look at it like the following ...

I can save and work hard and retire at 50.
I can save and work and retire at 55.
I can not save and work hard and retire at 65.
I can not save and work and retire at 70.

Personally, I want to retire at 50 in less than three years. The individuals quoted in the article can write all they want about how I squandered my youth. Meanwhile, in three years, I'll be squandering each day at the beach or backpacking in the mountains.

[Texas Proud]

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Originally Posted by bssc My big concern is that people like this will cause people save even less so down the road, people will have less. Then some "consumer activist" will not consider this inequal income distribution fair and want taxes on it. While this may seem far fetch, at the recent Senate hearings, someone called for annual fees on people pay off their balances in full because it wasn't "fair". See more here [

Yea.. that would be great... make us pay a fee and then in a year or less 'up' the fee that the others had been paying... more profit for them...

They make enough money from me.. not outrageous, but enough... and guess what, free markets are working aren't they When I got my first CC they all charged fees... then the fees started to go away. and then the benefits started to come... and now the benefits can be quite good... it is a cost of getting a customer...

BTW... they did raise the fees on us anyhow... if you go overseas, they charge 2% or 3% fee on the charges on top of a 1% fee from VISA or MC.. they also started to do this on money withdrawl...

[sallie4th]

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Originally Posted by 3 Yrs to Go Tell me when I'm going to die and I'll tell you whether I've saved too much.

First, thank you to all who have sent words of encouragement and welcome. I had to respond to this thread because it struck a chord. I drifted along for several years, not saving, rather spending pretty much everything and to quote ****" splurging on hubby, while he planned for the future". It was all work work work and giving up on dreams/needs/desires because that was my part of the "agreement". Now that I know when I'm "going", (can narrow it down, at least to year) I have what I call a "get out of jail free card"...it's now or never. Soooo...I work work work and then enjoy...I laugh more, love more, notice more and make different choices. I don't worry about yesterday, today or tomorrow....it's this moment that counts and it counts only to me...Oh I still plan for the future....I plan to be looking great....lying on a white sand beach somewhere in an over priced string bikini....with an enormous smile on my face....I'm saving for that and I'll save just enough, with enough left over for a nice fat tip for the cabana boy. My point.....don't get so involved in the future that you forget that there isn't that guarantee.

[sallie4th]

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Originally Posted by Mr._johngalt Ooh, this should be fun. JG

Fun is a good thing. However, mundane and irrelevant are not on my list, sorry to dissapoint once again.
PS....shouldn't you be on your way to the Cliff Clavin convention?

[cute fuzzy bunny]

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Originally Posted by sallie4th shouldn't you be on your way to the Cliff Clavin convention?

Oh dear, this is going to be far more fun than I thought.

When one becomes tired of eating popcorn, whats the traditional follow up?

[Texas Proud]

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Originally Posted by Cute Fuzzy Bunny Oh dear, this is going to be far more fun than I thought. When one becomes tired of eating popcorn, whats the traditional follow up?

Chocolate!!!

[cute fuzzy bunny]

I was hoping someone would say "BEER!".

But chocolate is okay.