Saving too much?

[Eagle43]

This is a tad different than the usual malarkey concerning saving. This one postulates that we should spend more and save less for retirement. The article says that you will be able to enjoy it more while you're young. This does sound a tad like C-T's balance theory. Of course, most Americans don't need prompting from the NY Times to spend more.

This Contrarian View from the Times article should have a warning label on it.

Quote: The argument between the sides is similar to the classic debate between the hardworking ants and lazy grasshoppers of Aesop’s fable. The financial planning industry says saving, even too much, provides a safety net and peace of mind, and possibly a gift to heirs at the end.

The economists answer that people would get more out of their money by using it when they are younger. “There is risk in saving too much,” Mr. Kotlikoff said. “You could end up squandering your youth rather than your money.”
Unquote
That last line sound like "don't get to be 80+ years old and have 1/2 million bucks invested. Spend it while you can enjoy it."

[Martha]

At least the article calls into question the rule of thumb that you need 75 to 85% of your preretirement income during retirement. If I followed that rule of thumb I would have a mightly hard time retiring too.

[Mr._johngalt]

You all know my story. I too thought of C-T when this topic came up.

Looking back, I don't feel a bit deprived based on the "saving"
I did in my youth (really didn't do any); nor do I feel a bit deprived now, even though I have
scaled way back from my "salad days". Pretty much sailed through life
doing what I wanted, when I wanted (both ex's will confirm this). It's been quite a party.

JG

[DangerMouse]

I've never believed that it is necessary to save 75-80% of your pre-retirement income to be able to retire. Like Martha, if we followed that line, we would be working until we are 60 to accumulate money we will most likely not need.

However, I see article as such being designed to encourage people to consume and ensure that they keep working and firing up the economy with their spending until the day they retire. I wonder how the couple who just bought the house and are counting on that feel about the woman who is only 10 years older than them but is in the position to retire because she did save?

[maddythebeagle]

maybe the NYT should have read this thread first: http://early-retirement.org/forums/i...?topic=11455.0

[newguy88]

Quote:

Originally Posted by Mr._johngalt You all know my story. I too thought of C-T when this topic came up. Looking back, I don't feel a bit deprived based on the "saving" I did in my youth (really didn't do any); nor do I feel a bit deprived now, even though I have scaled way back from my "salad days". Pretty much sailed through life doing what I wanted, when I wanted (both ex's will confirm this). It's been quite a party. JG

I kinda like this post. Very reasoned.

[Texas Proud]

The problem I see with this article is that it will give the people who don't want to save enough an excuse not to save.... and the people who DO save enough won't change as it is not in them to do so...

I am now saving a lot more than I 'need'... but I don't have anything that I want to spend it on that makes sense to me... I don't see value in buying a HDTV yet, but will do so in a few years when the prices come down... I don't see value in cable TV, but might do so at some time...

I don't see value in dropping $40 to $100K to 'update' my house when the dang thing is only worth $130 or so.. I would rather move to a house that is 'better' and have a higher value... but I don't want to do that either!!!

The negative on this article is that the people who follow this advice and live to be older will not be able to sue them for bad advice since it will be many years before they know it was (or could be) bad..

[d]

Quote:

The economists answer that people would get more out of their money by using it when they are younger.

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".

[lowflyer]

Quote:

Originally Posted by Texas Proud The problem I see with this article is that it will give the people who don't want to save enough an excuse not to save.... and the people who DO save enough won't change as it is not in them to do so...

I didn't read the article, but I understand the concept. I certainly don't "worry" about saving too much or not spending enough, but it is something that I have been thinking about more lately. I think TP's point above pretty much sums it up for many of us. The habit of saving and LBYM is just that...a habit. It's hard to do differently.

My parents are in their mid 70's and have managed to accumulate a nice pile of $$$$. Unfortunately, both grew up in families with little money and just "inherited" the habit of living "small" and saving. They will absolutely die with the most money they have ever had. I suppose that's good for my Brother and me, but is that really the way it should go?

Just last week, DW came home from her PT job and told me of one co-worker who died the day before and another who was shipped from work to the emergency room that day with a heart attack. Both women were in their early 50's. We've all heard these stories before, but it does make you think. DW thinks we should not hold back and try to enjoy ourselves while we can. Of course, that doesn't always involve spending money, but you get the point...

[d]

Quote:

I didn't read the article, but ...

then it would be wise to note that "Mr. Kotlikoff is trying to sell his software, called ESPlanner, to large employers as well as to the financial services industry. He has made no major sales so far. It is also available to individuals at www.esplanner.com for $150." i played with this a while ago, and was particularly put-off by the reliance on insurance products, to which i am personally averse.

[firewhen]

The whole % income needed in retirement thing never made much sense to me. If my income doubled, my expenses would not double. If you LBYM, it is best to figure what you have spent in the past and would like to spend on in the future, and that is what you need.

I also don't care much about what the article says. I know many people personally who are in their late 50's and 60's, some whose health is so-so, who would love to quit working, but must wait for SS and Medicare to have a chance to get by with what they have saved.

The only down side to saving too much is if you truly deprive yourself as you go along. As long as you live reasonably well to accommodate your tastes, extra savings can always come in handy.

For us, if we did not save over the years, FIRE would not even be a thought.

[donheff]

I wonder why no one seems to ever find any of the proverbial old folks who are unhappy because they saved too much? I don't recall ever seeing one of them interviewed.

[d]

anyone here who feels that they have saved too much?

[cute fuzzy bunny]

No, but I'd hate to see someone hang on until they hit 100% survivability with their worst case budget scenario.

I think people are flexible enough and smart enough and able to improvise enough to get by on maybe an 80% survivability. Maybe even 60%.

[SteveR]

Too much or too little savings is all relative to where you start your savings plan in relation to your retirement date. Current and future expenses should dictate how much net egg you need to sock away before you pull the plug along with your personal "risk tolerance."

Saving too much would only be a problem if you were emotionally and physically injured due to deprivation. Or if your SO left you because you were too stingy and turned into a miser. We each have our own level of need for spending to buy the stuff that makes us happy beyond basic living needs. Some won't be happy unless they can have the best of everything while others would be fine with 'possum' living. There is no right or wrong to this; only what works for each of us to meet our personal needs and expecations.

Some choose to save a ton so they can ER in style. Others take a more balanced approach and save enough to meet a certain time frame or age expectation. Others spend too much and can't save enough to ER. It is all sort of like pay yourself now or work longer than you would like. Again, it is a personal thing and we each have our own goals and means to get to the goal of FIRE.

[Gone4Good]

Quote:

Originally Posted by d anyone here who feels that they have saved too much?

Tell me when I'm going to die and I'll tell you whether I've saved too much.

[figner]

I agree that "saving too much" only becomes a problem if it feels like deprivation. Having gotten a decent job straight out of school, I went through several years of buying all kinds of gadgets, computer equipment, etc. It was fun, especially after living on a student budget, and still within my means. But after a while I decided to prioritize saving more, and after a few years realized I didn't feel any less "happy" with my life than when I spent lots on toys. There almost seems to be a "conservation of happiness" thing where I can spend lots or little on entertainment, but overall I seem to have as just as much fun now playing with the few gadgets I find worthwhile. I seem to get more intensely involved with the toys I already have, and looking forward to getting a new one while saving up for it also carries its odd sense of satisfaction.

Same thing seems to apply for home decor, eating out, and most things I consider luxuries. Spending more can be more fun in the short term, but doesn't seem to impact my long term happiness much.

[Nords]

Quote:

Originally Posted by d anyone here who feels that they have saved too much?

Sure, but only in hindsight.

At the time I was making the irrevocable decision it seemed that the amount we'd saved was "just right" and we hoped calculated it'd work.

I'll say it again... if I'd taken the time & trouble to learn more about the Navy Reserve when I was on active duty then I probably wouldn't have lasted past the 11-year point of starting a family. Ironically I was surrounded by Reservists at the time and opportunity was knocking like a John Bonham & Keith Moon duel.

[ADJ]

There could be such a thing as saving too much and deferring gratification and yes there are so old people that regret not taking advantage of certain gratifications in their youth. I once met a man about 70 on my way back from Europe. He told me he was on his way back to the US from a tour of Israel and Turkey. I asked him if he had a good time. He replied, at this age, it's hard to have a good time on a trip like that. He went on to say, what's the point, you save and you wait until you retire to do stuff like but then you don't have the energy to do it. I think this could be said for a lot of people who keep working and working because they could never reach the FIRE goal they've set and when they finally retire, they really can't enjoy much.

[free4now]

As CFB says, it all comes down to what level of risk you are willing to take. If you save enough for say 90% survivability, then 9 times out of 10 you saved too much, looking retroactively. The article didn't say what kind of survivability they were looking for, which is my beef with most financial articles. They present some plan but don't give you any indication of how likely failure is with that plan.

Sure if everyone is okay with 50% survivability, then we can reduce our savings enough so that shortages occur just as often as overages. But I don't want that risk.