Saving too much?

[timo2]

Even though we already have "enough", I find it hard to stop saving a huge chunk of our income. So I don't think we can save too much. Ever. Without going into too much details, I think that our socio-economic background has a lot to do with our reticence to live it up. We feel awkward doing it, and it is just not us.

maybe if you found a ridiculously expensive hobby?

 

[Milton]

I have 15 more years (will be 58) to go working for a megacorp with define pension and heathcare benefit for retiree. This may be a classic case of "golden handcuff". It's hard to leave early and forgo that benefit.... This month, our net worth hit $1M mark ... Sometime it crosses my mind that if we don't have to save a dollar more, we still have double than what we need in retirement (give or take).

It sounds like your private income will make it easy for you to forego the full pension and benefits, if you choose to do so.

Of course if you value the unnecessary extra money / security more than your freedom, you have the option of hanging on until age 58 ... but I'm not seeing any problem here.

 

[Andre1969]

I've run a few scenarios through Firecalc, and have discovered that cutting back my yearly savings rate doesn't seem to push my projected retirement date *too* much. For instance, Firecalc says that if I retire at age 59 (year 2029) and collect SS at 62, and keep investing 20,000 per year from now until then, I have a 95.2% chance of success.

If I drop that investing to 10,000 pear year, if I push retirement out to age 61, (2031), I have a 96.4% chance of success. And if I cut out investing completely, and put off retirement until the age of 63, (2033), I'll have a 97.6% chance of making it.

So, in my case, I can have $10,000 more per year now to play with, but I have to give up two years of my retirement to work longer. Or I can have $20,000 more per year now, but at the cost of four years of retirement. Actually, I'd have less after taxes, because most of my investing right now is tax deferred, going into my 401k.

At this point in my life, there's really nothing I want all that bad, to start diverting that money. If I cut back on the 401k to, say, just enough to get the company match, I'd still probably do something like investing in stocks/mutual funds, or paying down the mortgage. So it would still be saving for retirement, just not tax deferred.

If you want, maybe cut back on saving just a little bit and splurge every once in awhile, if there's something else you really want the money for, to enjoy life now. Just don't go overboard.

 

[ziggy29]

There were times I felt like I was saving more than we were going to need for retirement. But a couple of weeks ago I was laid off at age 47, and now I'm in a situation where I don't need to be desperate to take another job -- and indeed, might not actually *need* to w*rk again, all because of my [-]obsessive[/-] very diligent saving of 30-40% of my income, year after year.

 

[NextInLine]

Have you checked out the fine print on the DI? A lot of those work-provided policies are pretty lame. They may require full disability to get anything, and they may not be own occupation. One that is not own occ means that if you are a brain surgeon and have a stroke that leaves you unable to operate any more, but still able to flip burgers, you don't trigger the policy and go from earning $400K/year to $15K/year and the DI policy doesn't kick in.

Here is what is in the fine print:
"If you serve 18 months or more and become disabled for your position, you may be eligible for disability retirement. your estimated monthly annuity without survivor benefits would be about $4,503.

Subsequent years will be less. A disability annuity begins the day after separation or pay ceases, and continues while you remain, even for life. If you are also entitled to disability benefits from the Social Security Administration, your disability annuity will be reduced by the Social Security pension. Social Security disability benefits would be replaced by old age benefits at age 67".

One thing I need to find out from HR is "Subsequent years will be less". How much less?

 

[jon-nyc]

And the SSDI bennie would probably be on the order of 2500 a month.

 

[growing_older]

There were times I felt like I was saving more than we were going to need for retirement. But a couple of weeks ago I was laid off at age 47, and now I'm in a situation where I don't need to be desperate to take another job -- and indeed, might not actually *need* to w*rk again, all because of my obsessive very diligent saving of 30-40% of my income, year after year.

This.

You could be saving too much if you feel deprived in your day to day lifestyle, but if you are comfortable with how you are living, the value of having saved enough to absorb situations like this with calm is worth it all.

 

[Milton]

You are probably not saving too much in reality. There is just as good or a greater chance the company will say goodbye to you than vice-versa, so you best stick to your plan.

As ziggy29 points out, he is the poster child for that sort of scenario. 15 years is a long time, and a lot of unforeseen developments can occur. But if you are FI, you'll be able to take it in stride.

 

[uc_brian]

I think I've been saving approx 68 percent for the past 5 years.

 

[Sea Kayaker]

My DW and I are saving about 75% of our income these days. Really, I don't think we are sacrificing much in terms of lifestyle, and I am probably going to stop working next year before my 42nd birthday.

Definitely not saving too much.

 

[ShortInSeattle]

My DW and I are saving about 75% of our income these days. Really, I don't think we are sacrificing much in terms of lifestyle, and I am probably going to stop working next year before my 42nd birthday.

Definitely not saving too much.

Are your percentages after tax?

 

[someguy]

Probably the most obvious/likely opposition to the chorus of "you can't save too much" is, by definition, not going to be represented here.

 

[RunningBum]

Then when a co-worker dies in his 40's or the crap that happened at Boston today, I think I'm saving too much.

I really don't think that the last thought of a bombing or heart attack victim is "OMG, I could've bought that BMW!" Even a terminally ill younger person must have bigger worries than stuff they didn't buy. On the other hand, someone elderly being forced to severely cut back on things has plenty of time to regret not saving more.

Directly to the OP, if you feel you are depriving yourself, loosen up and spend a bit more. Congrats on putting away so much. That money gives you a lot of flexibility. You aren't guaranteed that job will be there for another 15 years, or the pension plan won't change. One of you may get sick and you may need or want to retire earlier than 58.

 

[someguy]

I really don't think that the last thought of a bombing or heart attack victim is "OMG, I could've bought that BMW!" Even a terminally ill younger person must have bigger worries than stuff they didn't buy. On the other hand, someone elderly being forced to severely cut back on things has plenty of time to regret not saving more.

If I knew I were going to die, say, Jan 1 of 2014, I would definitely change what I am doing now in response. I wouldn't necessarily go out and buy a new 7 series, but I sure as hell would be working less--if at all--and would be alternating spending time with family and travelling.

 

[ronocnikral]

Here is what is in the fine print:
"If you serve 18 months or more and become disabled for your position, you may be eligible for disability retirement. your estimated monthly annuity without survivor benefits would be about $4,503.

Subsequent years will be less. A disability annuity begins the day after separation or pay ceases, and continues while you remain, even for life. If you are also entitled to disability benefits from the Social Security Administration, your disability annuity will be reduced by the Social Security pension. Social Security disability benefits would be replaced by old age benefits at age 67".

One thing I need to find out from HR is "Subsequent years will be less". How much less?

you should also find out what they mean by "disabled." when one is dead, it is rather cut and dry. but being disabled is a huge gray area.

 

[RunningBum]

If I knew I were going to die, say, Jan 1 of 2014, I would definitely change what I am doing now in response. I wouldn't necessarily go out and buy a new 7 series, but I sure as hell would be working less--if at all--and would be alternating spending time with family and travelling.

Of course. But I wouldn't do this because someone else (totally unrelated to me) is going to die on 1/1/14, which is basically what the post I quoted referred to.

Nor would I be lamenting that I had been saving too much up til today. In fact I'd be happy that I'd have saved enough to immediately quit (if I was still working, which I'm not) and spend my remaining days with family and doing what I want. I'd also be happy to have enough to last if the date really turns out to be 1/1/15 or 1/1/16, and enough to leave some for my family.

Funny story though. I knew at guy at IBM who was diagnosed with cancer and given a year to live. So he quit, and enjoyed his remaining time, which included eating very well. Turns out the cancer went into remission. And he had a heart attack. When I met him he was back doing contract work for IBM out of necessity. Not sure what that message is. Just a story.

 

[EllisWyatt]

Talking as another who is in the "Oil Bidness".........

When I was your age, the same thoughts were crossing my mind. It was a different era, however - the Major I was w*rking for was in "downsize" mode for the first 20 years of my empoyment, and although I survived the 13 rounds of layoffs/redundancies/right-sizings, etc. which eliminated 85% of the geological positions over the 20 years, I knew the next roll of the dice could be me. Right now we are in an "up" cycle, and tmes are good. But it could turn around any time with a drop in crude prices, which will make many of the resource plays uneconomical. Then we'll be back in the old cycle.

+1 on what other posters have said about the possibility of either losing the pension or finding it radically different than expected. The company I worked for had full vesting at age 50. When I was 45, our company "merged" with another major, whose retirment date was age 55 and signifiantly worse benefits.

Was glad that I had been a saver vs. spender - it gave me alot more options than the co-workers who had gone the other way.

 

[someguy]

I think the overall message is that balance is key. The IBM guy swung too far to one extreme and paid a price, albeit in a much different way than he expected.

Funny story though. I knew at guy at IBM who was diagnosed with cancer and given a year to live. So he quit, and enjoyed his remaining time, which included eating very well. Turns out the cancer went into remission. And he had a heart attack. When I met him he was back doing contract work for IBM out of necessity. Not sure what that message is. Just a story.

 

[gozer]

I don't think you can really save too much for retirement. If your money outlasts you, you can always create an endowment. Or how about having an open bar at your funeral.

Seriously, I actually did think I was over doing it many times. But before I could ease up the company would step in and lay off a bunch of people which kept me motivated.

 

[NextInLine]

I pretty much lived out your scenario. Now, at 62, with a DBP that could support us with SS pretty much in our current lifestyle, we have IRA and investments that will generate over 60k more than we currently spend. Or something like that.

Your question can only be answered by an individual based on their comfort level and attitudes towards money. Until I hit about 50, I never really had much confidence I'd hit the DBP; it was then that I realized I could buy in 10 years (cost a good chunk of cash) and leave at 60. Having done so, it was a huge penalty to leave before 60. But, other than last year or two, I actually enjoyed my career. My father always said I needed to fund my own retirement, so that was my plan. The DBP was just a huge bonus.

We live in nice house we paid cash for 18 years ago, have a new truck and an old Acura. I sold the Porsche a few month ago because I needed the space and it just seemed....pretentious? We travel twice a year to see grandkids in London and son in Africa.

Because we care for MIL (well, wife does) we cannot travel more than that. As soon as that situation changes we'll travel a lot more.

So, yeah, we saved too much and unless we start traveling a whole lot (and buy first class tickets!), our kids will inherit our "mistake." But I'm really quite happy it's that way. I didn't really work longer than I wanted or enjoyed. We saved about 25% most of our years after 35, but have no idea how we would have spent more on meaningful things or activities. We traveled, drive decent cars, eat out when we want, yet watch where the money goes pretty carefully.
So currently we draw out ~2%WR, will defer SS until 70. We're trying to spend it more freely, but once you've lived your life a certain way it's damn hard to start throwing dollars away like they don't matter. It makes it really nice though to rest easy that the WR is not subject depletion. So for the life of me, I don't know how we'd have changed what we did during those last 20-30 years. We've always been conservative about money (but invested it fairly aggressively, to this day still ~55% equity MF, mainly index) and the end result is we can enjoy our retirement without too much concern for the money. Retiring earlier just didn't make sense as I enjoyed the job until the end and as the DBP began to materialize at 60, we just ended up a belt and suspenders plan.

thanks h2o. we did spend some lately: huge TV and a surround sound system which I always want. but my net worth still manage increases to $1.1M thanks to the market. This year, my megacorp offers early out. I'd take it in ten years. that is 5 years earlier than planned.