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Why Keep Saving?
Old 03-16-2008, 09:25 PM   #1
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Why Keep Saving?

Been thinking about this lately. Have been a saver for a long time and have gotten to the point where if I don't save another penny - and get 7-8% annual returns, I will have a comfortable retirement. If expected inheritance arrives then life will be even easier - I understand it is not a sure thing and it is not requried for comfortable retirement.

So the question is why keep saving?
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Old 03-16-2008, 09:41 PM   #2
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In my case, if I could be assured of getting a fairly steady 7.5% return I'd be done. The trouble is that it is not easy, in my opinion. If you said you needed a 5% return, I'd say quit saving. I am conservative and I think that if I still needed 7-8%, I'd keep going for awhile. Especially at age 43. Of course if the inheritance is solid, that's a big factor.
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Old 03-16-2008, 09:44 PM   #3
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From 1966 to 1982, your desired return was not met.
When you stop saving, your lifestyle expenses go up so you then need a larger nest egg.
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Old 03-16-2008, 09:45 PM   #4
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An old habit is hard to break perhaps. ...
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Old 03-16-2008, 09:52 PM   #5
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I don't think we will get 7-8% return this year, do you? Of course, my crystal ball is STILL out of order.

In your position, I would start positioning myself for ER, though. For example, do you plan to downsize or move at the beginning of ER? It could take a while to sell in this market if you do. Since I plan to move, in your shoes I would be fixing up the place so that when I am ready to sell, my house will be ready to sell, too. In fact, that is what I have been doing, slowly. I have also been moving my assets slowly from my accumulation phase asset allocation, towards my planned ER asset allocation.
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Old 03-16-2008, 09:57 PM   #6
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It's a matter of balance. If conservative calcualtions say you're going to be financially OK in retirement and you're missing out on doing some things NOW that you'd really like to do NOW, hey, go for it!

But, be conservative. I've been ER'd for 21 months. At first I thought I had over-saved as physical limitations were keeping me from doing more things (than I could have done had I ER'd five years earlier - see avatar) than lack of money was keeping me from doing. That is, I felt more concerned about time and aging than retirement income and wishing I had retired with more time and less money. Then........ some delayed compensation coming in at less than I assumed and the current market downturn...... I'm suddenly quite glad I "over-saved! Today's FireCalc runs, given my current worth and assuming I was retiring today, say I'm still OK but with little slack at all!

Balance..... Balance.... Balance....
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Old 03-16-2008, 10:11 PM   #7
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One of my biggest obstacles to the "quit saving" road is my unwillingness to give up free money - aka the 401K. My employer matches $ for $ up to 6% - don't know if I could sleep at night if I didn't take full advantage.
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Old 03-16-2008, 10:14 PM   #8
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I'd at least do the 401k until ER.
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Old 03-16-2008, 10:41 PM   #9
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I'd at least do the 401k until ER.
Agree....free money is not to be walked away from. The worse that could happen is you have too much money to spend.

We are retired and still save a little here and there in a MM account for living expenses. It is really income but if you don't spend it it is savings. Every dime I don't spend is $2.50 I don't need to save.
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Old 03-17-2008, 12:52 AM   #10
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Originally Posted by Arc View Post
Been thinking about this lately. Have been a saver for a long time and have gotten to the point where if I don't save another penny - and get 7-8% annual returns, I will have a comfortable retirement. If expected inheritance arrives then life will be even easier - I understand it is not a sure thing and it is not requried for comfortable retirement.

So the question is why keep saving?
Unless you feel being deprived, there is no downside of saving. Since we cannot count on 7 - 8 % returns in the future or no unforeseeable events that could devastate our finance, saving is a prudent mitigation.
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Old 03-17-2008, 02:04 PM   #11
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Have been a saver for a long time and have gotten to the point where if I don't save another penny - and get 7-8% annual returns, I will have a comfortable retirement.... So the question is why keep saving?
It is possible to rationalize any decision. E.g., a person with savings of (only) $30,000 has more than enough money to last the rest of their life: if we assume that they will die in a traffic accident later this week (admittedly, statistics suggest that scenario is much less likely than averaging 7-8% returns).

Personally I wouldn't feel comfortable banking on 7% or 8% annual returns, so I'm going to continue saving. If you feel differently, stop saving and enjoy your money now.

It's your call!

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The worst that could happen is you have too much money to spend
I'm not sure that things are entirely that simple. The worst that could happen is that Arc comes down with some terminal illness and regrets not spending the money when he or she had good health and was in a position to enjoy it [see generally Enjoy Yourself Lyrics by Guy Lombardo]. None of us knows what the future holds for us, and there are opportunity costs to every decision.
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Old 03-17-2008, 03:42 PM   #12
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I guess I don't look at it as saving so much as just not spending! And the not spending is because I like to live simply and don't feel deprived by my lack of buying things or even experiences (like expensive travel).

You didn't say whether your financial security will be based on something like a pension or not. If not (like in my case) and it's just on your savings, and you don't have them all in fixed income investments, then your net worth can go up and down, so the added savings gives a nice cushion and replenishes your declining net worth.

But if you're absolutely sick of saving and want to spend a little, I give you permission!
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Old 03-17-2008, 03:49 PM   #13
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Agree....free money is not to be walked away from. ...
In a strange twist, by semi-retiring, we are now eligible for the tax rebate and the child tax credits which are much more free money from the government than any free money from a 401(k) match. Plus our taxes drop substantially as well which is kinda like more free money.
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Old 03-17-2008, 05:30 PM   #14
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We are retired and still save a little here and there in a MM account for living expenses. It is really income but if you don't spend it it is savings.
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I guess I don't look at it as saving so much as just not spending! And the not spending is because I like to live simply and don't feel deprived by my lack of buying things or even experiences (like expensive travel).
I've got enough saved and invested plus a cola'd pension, which all together gives me enough to live on for the rest of my life. However, I still keep socking away a little bit of my monthly pension check each month. It's there for a 'rainy day' or maybe for an extravagant vacation someday.....or maybe a new sports car...or...or..... Like tangomonster, I like to live a fairly simple lifestyle.....still, I don't deprive myself of anything that I want or need (I just don't really want or need much)....but I still don't spend all of my monthly income, so I 'bank it' for later.
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Old 03-17-2008, 05:48 PM   #15
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Saving is a habit just like shopping is and it's hard to break. If you must I would suggest spend your money comfortably on your earn income and don't touch your saving. That alone is a luxurious lifestyle for me.

as far as 7-8%, i could only dream about it. if i can do that i retire already. it's more like 3-4.5% for me.


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Old 03-17-2008, 06:02 PM   #16
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I've got enough saved and invested plus a cola'd pension, which all together gives me enough to live on for the rest of my life. However, I still keep socking away a little bit of my monthly pension check each month. It's there for a 'rainy day' or maybe for an extravagant vacation someday.....or maybe a new sports car...or...or..... Like tangomonster, I like to live a fairly simple lifestyle.....still, I don't deprive myself of anything that I want or need (I just don't really want or need much)....but I still don't spend all of my monthly income, so I 'bank it' for later.
Other than the COLA'd pension, I'm in the same boat. If I can get an after inflation return of 0%, DW & I will live the lifestyle we have become accustomed to. Hey, the kids will even get something when we go.

BUT... There's always the black swan and those of us raised by depression era parents and grandparents are paranoid. I still worry with a WR (note lack of Safe) of ~2%. Hell, I'd probably worry if our WR was 0.4%.
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Old 03-17-2008, 07:21 PM   #17
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.......those of us raised by depression era parents and grandparents are paranoid......
I can relate to that! My Grandparents, Dad, and most of my Great-Uncles/Aunts survived their unemployment of that era, using the profits of their bootlegging business in the St. Louis area......until a few of them came across some newly created manufacturing jobs up here in the North. But even then, they saved every spare nickel, and seldom bought anything that they didn't absolutely have to have. In their later years of life, they all loosened the purse strings a bit and spent whatever they wanted, on whatever they wanted!

But because of my upbringing, I still think long and hard before I make most purchases....."Do I really want it?"...."Do I need it?"......."Should I hold off and spend it on something else instead?" Sometimes I make the purchase...sometimes I walk away. I think now, that it's probably more about thriftiness than it is paranoia with me. Before I actually ER'd, I think there was a bit of fear that I might not be able to survive or make it without a bi-weekly paycheck. But once I got that first pension check, and actually did survive the first month of ER, I knew everything was going to be cool! Almost 1 year later......No Fear.....Life is Grand!
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Old 03-18-2008, 08:34 AM   #18
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But because of my upbringing, I still think long and hard before I make most purchases....."Do I really want it?"...."Do I need it?"......."
If more people would ask themselves such questions, the landfills of this world would be a lot less full.
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Old 03-18-2008, 12:54 PM   #19
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If more people would ask themselves such questions, the landfills of this world would be a lot less full.
As well as basements, attics, and garages!
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Old 03-18-2008, 01:04 PM   #20
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As well as basements, attics, and garages!
Sometimes I wonder if the McMansions some people have are full of stuff that people just don't get around to carting to a landfill! If they did some ruthless culling, would they find they didn't really need a McMansion after all, and could downsize and invest the difference in price?
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