Is there such a thing as saving too much?

[reneeh63]

I have not read all the responses, but like your plan, I paid off my truck and house instead of investing. After the fact, I regret doing that. I like have everything paid off, but over that same 8 year period, the stock market was on fire. I love being debt free, but I wish I had invested that money into good growth mutual funds, and then, when I had the money from investments to pay off the house, do it. Take advantage of the stock market growth to help pay off the mortgage. I would pay off all debts as quickly as possibly except the house. Keep investing some money in the market to pay of the house, and do that when the declining mortgage rate meets the increasing savings rate.

Totally agree...the time to be debt free is closer to retirement - THEN you can sleep the sleep of an old person safe in their bed. For NOW you need to get as much $ into the market and working for you as possible. The value will raise almost exponentially and will make the interest you're paying on your mortgage look like peanuts.

I actually think it is far overrated to be "debt-free" when you're already living well within your means (meaning you didn't buy a house of 10x your annual income, for example). If the house is a realistic amount and the interest is low and you refinance when it makes sense, then throw your money into the market and let it WORK FOR YOU. Being overly conservative when you're young is...foolish!

 

[WWDog]

This country and the rest of the world for that matter are about to go through significant financial upheaval. The debt that this country is pilling up is significant and times are about to get difficult. I would continue on your present path until all is clear. There are many and the number is growing that will be in trouble when it hits the fan.

 

[imnontrad]

Well, if your health, etc. holds out, then yes. BUT if there is a major medical event, those savings may disappear faster than you think. this may include expenses not covered by insurance, someone who needs to leave the workforce to care for that person, etc.
So like always, plan for the worst and hope for the best.

 

[Paulz]

So I am 31 and currently have a planned retirement date of 57 years old with the Fed (I know 57 isn't really that early). If I keep my current investments going of maxing out my TSP and Roth IRA. Assuming a mild return over 26 years of 6% I'll have a little over $2.4 million in my retirement accounts. I'll also be collecting 38% of my salary which is currently at a base of $100K pre-overtime. I don't plan on leaving the fed prior to 57 due to the fact that my significant other has some medical issues which would make her healthcare pricey and by waiting until 57 I'll be able to keep my health benefits into retirement.

I'll preface my comments as I'm a Fed myself, so have a very good understanding of the retirement, pension, and benefits.

Since you are retiring at 57, you are leaving at your MRA (Minimum retirement age) and accepting the 25% pension hit (5% for every year under age 62) unless you will have 30 years at 57. Just by working until age 60 (or earlier if you hit 30 years) you can avoid the pension hit. You may not need the money, but to give up 25% because of 3 years seems unnecessary.

While maximizing our retirement savings, we've paid down our house, always had paid off vehicles, raised kids and sent them off to college, etc. We never had the biggest house or newest car, but you can live a good life living below your means and being an aggressive saver.

Inflation is a beast that can't be satisfied. You are looking at your potential $2.4m in 2021 dollars which realistically might only be worth $1.3-$1.5.

I have a similar dollar amount in my TSP, so won't argue with your numbers, but I think you have a very optimistic view of your future. Life happens, so all you can count on is what you currently have. It is very presumptuous to spend money you "don't need" before you actually don't need it. A lot can happen in 25+ years.

 

[RetirementNinja]

Congratulations on your progress and planning so far. You are outside the norm with such a long term attitude, and will prosper because of it. With your mindset I can tell you will beat your plan expectations and retire earlier than you intend. I would probably pay down debt to get it out of the way generally. With low interest rates and the market volatility these days, I'd soak some more $ in "large" dips in market, such as the one going on now, to time average in that exceptional gain going forward.

I used firecalc to model my $ before pulling trigger on retirement in October at the age of 52. Since you are not retiring anytime soon, don't fret the details. Just stick with your consistent intent and don't "oversacrifice". I was able to double my investments every 4 years for the last 16 years, which was WAY over the 4-6% "assumption" but I wouldn't have been able to plan for that.

One more word of advice. Don't put money in funds that are not consistently doing well, and diversify. Then monitor/watch your status daily and track your data in a spreadsheet/graph monthly going forward. It is very good at maintaining motivation. Good luck!

 

[J277]

I'll preface my comments as I'm a Fed myself, so have a very good understanding of the retirement, pension, and benefits.

Since you are retiring at 57, you are leaving at your MRA (Minimum retirement age) and accepting the 25% pension hit (5% for every year under age 62) unless you will have 30 years at 57. Just by working until age 60 (or earlier if you hit 30 years) you can avoid the pension hit. You may not need the money, but to give up 25% because of 3 years seems unnecessary.

While maximizing our retirement savings, we've paid down our house, always had paid off vehicles, raised kids and sent them off to college, etc. We never had the biggest house or newest car, but you can live a good life living below your means and being an aggressive saver.

Inflation is a beast that can't be satisfied. You are looking at your potential $2.4m in 2021 dollars which realistically might only be worth $1.3-$1.5.

I have a similar dollar amount in my TSP, so won't argue with your numbers, but I think you have a very optimistic view of your future. Life happens, so all you can count on is what you currently have. It is very presumptuous to spend money you "don't need" before you actually don't need it. A lot can happen in 25+ years.

I'm glad to have another fed in here to weigh in. I'll have 38 years of service at my MRA thanks to buying back military time. If I didn't do this I would only have 27 years at 57. I do like to hear that you paid down your home while maximizing retirement savings. That is what I keep debating on doing instead of putting the money that would go towards the mortgage into a taxable brokerage. I feel like at least maxing out my retirement accounts will put me in a decent place by 57. Did you regret paying down the home? I'd imagine when you paid down your mortgage the rates were probably higher than they are now which made the rate of return of paying it off better than I would see today.

 

[Paulz]

Did you regret paying down the home? I'd imagine when you paid down your mortgage the rates were probably higher than they are now which made the rate of return of paying it off better than I would see today.

No regrets paying down the home. We are in the process of looking for our future retirement home, so we will have a mortgage that will need to bridge the time between when we buy and sell our existing. Everyone that I have talked to that is retired have cited the peace of mind with having no mortgage. I guess I trend more defensive in that seems more appealing to me than even more money in the stock market.

Thats fantastic that you had all that military time. I only bought back 6 years so while it helped its not enough!

 

[Hyper]

For us, we seen the biggest gains when we no longer had loans. Afterward it was very easy to pay cash for everything.
I quit earning a paycheck at 45yo. We also lost 1/2 our wealth twice in the markets.
I'm of the opinion that there is a sweet spot as to how much $ you retire on before working those extra years becomes, working those extra years to pay more taxes.

 

[athena53]

I'm of the opinion that there is a sweet spot as to how much $ you retire on before working those extra years becomes, working those extra years to pay more taxes.

I agree. I retired at 61, so not as early as many here, but calculated that if I'd stayed on till 65, my SS would have increased by $50/month after my employers and I contributing another $50K or so into the system (not counting additional Medicare premiums, which would provide no extra benefit). Not a good deal.

 

[FLJim]

Save!

So I am 31 and currently have a planned retirement date of 57 years old with the Fed (I know 57 isn't really that early). If I keep my current investments going of maxing out my TSP and Roth IRA. Assuming a mild return over 26 years of 6% I'll have a little over $2.4 million in my retirement accounts. I'll also be collecting 38% of my salary which is currently at a base of $100K pre-overtime. I don't plan on leaving the fed prior to 57 due to the fact that my significant other has some medical issues which would make her healthcare pricey and by waiting until 57 I'll be able to keep my health benefits into retirement.

Using the 4% rule of thumb I'll be able to draw down 96k a year from my retirement accounts which combined with my pension will be much greater than my current income. Due to this I think I may be saving too much. I don't want to not max out my retirement accounts though as it doesn't hamper our lifestyle. I feel like I'll have FOMO of not investing. We live in a typical lower middle class neighborhood and are very happy with our current luxuries we do have. We are really trying to abide by The Millionaire Next Door way of life. As most of my coworkers live in homes 2-3x the value of mine.

I have an additional $2000-$3000 a month I have been putting away into a brokerage account but I feel like that isn't really necessary. I'm now debating on using it instead to pay down my truck and house even though both are at a 2.25% interest rate and I know the math says the money would do better in the market. If I do this route the truck would be paid off by fall of 2022 and the house would be paid off by the end of 2025 beginning of 2026. I feel like this is a smart call as an effective 2.25% guaranteed gain over 4 years feels pretty good to me. I also want to at least pay a good chunk of the house down as using a VA loan I didn't put anything down on the purchase. Luckily thanks to the housing boom recently I do have positive equity in my home.

What do you think? I feel like since I'm already going to exceed my retirement goal I can decide to pay down my home or really spend the money however I see fit.

I really appreciate your time and advice in advance.

IMO you can't save too much. And I thought that the millionaire next door didn't finance his vehicles. Pay off your vehicle, and pay cash for future ones that are 3 years old, or so. Pay off the house regardless of how "great" you think the loan rate is! Life happens. Just make sure you are ready when it DOES!
Like my dad told me MANY years ago: It's OK to be poor. It's OK to be old. Just make sure it's not at the same time!

 

[OldShooter]

... One more word of advice. Don't put money in funds that are not consistently doing well ... Then monitor/watch your status daily and track your data in a spreadsheet/graph monthly going forward. ...

Sorry, but the research says that both of these are bad ideas.

Re funds that are doing well, the false premise here is that fund manager performance "persists." It does not. There is tons of research going back 50 years that shows this. Maybe the most easily accessible are the semiannual S&P Manager Persistence reports: https://www.spglobal.com/spdji/en/indexology/core/persistence-scorecard/ Here is a good little video on the subject, too: Dr. Kenneth French (look him up on Wikipedia) on picking a manager: https://famafrench.dimensional.com/videos/identifying-superior-managers.aspx

Re daily checking, the research consistently shows that investors who check their accounts frequently do not do as well as investors who do not. Nobel prize winner Richard Thaler discusses this in his book "Misbehaving," as does (IIRC) Nobel prize winner Daniel Kahneman in his book "Thinking Fast and Slow." I have read that the Schwab robot sends a warning message to customers who check too often, to the effect that "successful investors do not check their accounts as often as you are doing."

The gist of the behavioral finance explanation is that evolution has made us humans risk averse and that the "downs" in the daily ups and downs make a bigger impression on us than the "ups." This causes the frequent lookers to trade more, to their detriment.

Hence Warren Buffet's observation: “The stock market is a device for transferring money from the impatient to the patient.”

 

[kaudrey]

OP - as a fellow Fed - let you share my story: I've been a saver all of my life. I got divorced, and married again 4 years ago to a wonderful man who was also a saver, and is 12 years older than me. I just got past the 30 year mark at age 52. I am retiring in 2 1/2 months, just before I turn 53.

I am retiring before I hit my MRA, so am doing a deferred retirement. I can't keep our FEHB health insurance, so after COBRA I'll be ACA (my DH will be eligible for Medicare, so it will just be me). Is this a big cost? Yes. Is it worth it? Heck, yes!

And, I can do it because I saved "more" than I would have needed if I stayed until 57, which was my original plan when I was your age.....

Life throws curveballs - with enough money, you don't have to be handcuffed by things like the MRA.....

Also, For the last almost 20 years, my projections spreadsheet used 6% investment return and 2% inflation, and you might be surprised how close the numbers are overall.

 

[mickeyd]

Save and invest as much as possible as often as possible. The only downside that I see is that you could die rich.

 

[Dtail]

I agree. I retired at 61, so not as early as many here, but calculated that if I'd stayed on till 65, my SS would have increased by $50/month after my employers and I contributing another $50K or so into the system (not counting additional Medicare premiums, which would provide no extra benefit). Not a good deal.

I retired at 57 and IIRC, my SS would have been 50 a month higher working to 62.

 

[pjigar]

It took a while, but I think I have mastered this.

I would need to master this when I FIRE. I have started telling my wife to loosen up the purse strings. I can blow the dough on big ticket hobby items (tools, gardening, toys, etc.) but I can't seem to spend the same dough on services! I wonder why.

 

[RobbieB]

I'm still getting on the roof to blow out the rain gutters before the storms.

 

[Time2]

Pay off the house regardless of how "great" you think the loan rate is! Life happens.

My thinking is, I'd rather have the money in a mutual fund that I can access, when "Life happens" then in a paid off house.
The bank that had the mortgage you paid off, will not offer you the money back, especially if you have lost your job!

 

[teetee]

My thinking is, I'd rather have the money in a mutual fund that I can access, when "Life happens" then in a paid off house.
The bank that had the mortgage you paid off, will not offer you the money back, especially if you have lost your job!

I am renting but I do prefer to have my own house even if it is just a shed or on the back of a truck.

The thing is after taking home ownership into consideration, I also decided to postpone my house buying event. At the beginning it was because I don't want to borrow money for a house, but now that I have enough asset to buy two or even three single family houses, the timing is just wrong (COVID, housing bubble, inflation, etc).

My life is full of missed opportunities. But at least I don't have to worry about money.

 

[OldShooter]

... My life is full of missed opportunities. ...

Why should you be any different? Missed opportunities are always clear in he rear view mirror but none could have been seen through the windshield. The future is like that.

 

[NW-Bound]

Why should you be any different. Missed opportunities are always clear in he rear view mirror but none could have been seen through the windshield. The future is like that.

+1

I am happy with the few opportunities that I seized. They were enough for me to have a comfortable life, and I am thankful.

 

[Gumby]

The one that got away always seems larger than the one in your creel.

 

[Dash man]

I am renting but I do prefer to have my own house even if it is just a shed or on the back of a truck.

The thing is after taking home ownership into consideration, I also decided to postpone my house buying event. At the beginning it was because I don't want to borrow money for a house, but now that I have enough asset to buy two or even three single family houses, the timing is just wrong (COVID, housing bubble, inflation, etc).

My life is full of missed opportunities. But at least I don't have to worry about money.

What makes you think housing is a bubble? Do you really expect prices to decrease? I think you’ll be waiting a long time.

 

[Paulz]

What makes you think housing is a bubble? Do you really expect prices to decrease? I think you’ll be waiting a long time.

Yes...and no. Unlike 2008, this real estate market is very market specific. Home prices will definitely drop in cities like Boise and Austin for example. Other cities such as DC will continue to rise, albeit slowly. In general, I agree with you and we will not see the dramatic price drop in housing prices for the majority of cities. That being said, there are 15-20 markets that had their prices driven up by speculation and investors in which there is no ability to support those values. Now that Opendoor and Zillow have removed themselves from the "investment flipping" business, we've already seen the softening in a few markets.

 

[NextInLine]

So I am 31 and currently have a planned retirement date of 57 years old with the Fed (I know 57 isn't really that early). If I keep my current investments going of maxing out my TSP and Roth IRA. Assuming a mild return over 26 years of 6% I'll have a little over $2.4 million in my retirement accounts. I'll also be collecting 38% of my salary which is currently at a base of $100K pre-overtime. I don't plan on leaving the fed prior to 57 due to the fact that my significant other has some medical issues which would make her healthcare pricey and by waiting until 57 I'll be able to keep my health benefits into retirement.

I’m almost identical to your situation. I’m 51, with a nest egg of $2.1M and a paid off house. I plan to retire in 7 years at MRA 58. No regret on saving “too much”, because I live life on my term. I did ask this same question on this forum 8 years ago!

My only suggestion is consider Roth TSP. in your withdrawal phase, you will likely be hit with tax torpedo. I learned it from this forum. I contributed max plus catch up to Rothtsp when I was 50. Wish I have done this earlier.

 

[Koolau]

Yes...and no. Unlike 2008, this real estate market is very market specific. Home prices will definitely drop in cities like Boise and Austin for example. Other cities such as DC will continue to rise, albeit slowly. In general, I agree with you and we will not see the dramatic price drop in housing prices for the majority of cities. That being said, there are 15-20 markets that had their prices driven up by speculation and investors in which there is no ability to support those values. Now that Opendoor and Zillow have removed themselves from the "investment flipping" business, we've already seen the softening in a few markets.

Locally, there are a lot of pressures driving prices higher. There's been a virtual moratorium on new building. We aren't making any new land (except on Big Island). We're in the midst of a baby boom locally. "Rich" mainlanders and "foreigners" are buying up real estate. Balancing this are the fact that, culturally, it is acceptable to combine generations of families (I knew of one four-generation house-hold - now down to two generations.) Young folks are moving off Island for affordable housing/good-paying j*bs.

Just when I think housing can't get more expensive - it does! YMMV