Is there such a thing as saving too much?

[DrRoy]

I'm 68 and in the "saved too much but I'm happy about that" camp. Like you, I didn't live a life of deprivation, but I chose my priorities carefully. Nice houses, but less than the bank would let me borrow, and no major redecorating or upgrades unless I could cash-flow them. Modest cars, driven till they were no longer reliable. International travel because DH and I loved that. Mowed our own lawn and cleaned our own house.

More money is better than less money.

+1!! Word for word the same as us, except early 60's. Don't save so much that you deprive yourself of some comfort and fun. That being said, I also agree that more $ is better than less $. We are over-funded and are enjoying the ability to spend on practically anything that is reasonable.

 

[Andre1969]

Not too many 30-something can afford a 911.

Eh, it's over rated. Used to be a common option package on domestic full-sized cars

 

[FLSUnFIRE]

Plus who knows maybe universal healthcare will be here before I hit 57 and I won't need to stay until then for health benefits. I'd sure regret not having enough saved by then.

I wouldn't be surprised although you'll probably want supplemental insurance/savings to have options as the baseline care may be less than ideal.


I recently walked away from my FED job at 47 and for me, now, ACA is not bad (I'm so far very happy with my plan and its cost -even subsidized). I plan to qualify for subsidy for a couple years but eventually will probably loose my subsidy as my portfolio continues to grow and begin my SEPP from TSP that will give me lots of "regular" income.



My advice would be to not deprive yourself of what you really want and can afford but to continue to save aggressively. Your future self will likely be grateful your current self gave him more options! At 31, you have a lot of time. I probably averaged around 30% savings rate of gross pay over my career ranging from 10% to 45% depending on the year.



It could be argued that I'm being too cheap (spending is under 2% of my assets) but I'm not feeling deprived and the security of a really low spend rate gives me more comfort than stuff. I'm also getting used to drawing after being a lifetime saver and the market/economy is, um, "interesting" right now. I do see myself spending a bit more (primarily on travel/experiences) as I adjust and fee more confident blowing that dough! Looking back, I don't really have regrets but if I had a redo, I would have spent even less rather than more - not because I want more now but because the ROI on many splurges was lower than expected.

 

[goingtotravel]

Just retired this year as a Fed and you have to consider that your DW would only get 50% max of your FERS retirement if you passed away after retiring. Not a fun topic but something married couples need to consider especially if one person has a much larger/or only retirement income.

DH and I both retired from Federal careers and if you look at our combined retirement benefits plus our investments it looks like we may have over-saved. But if DH or I pass away then suddenly we lose 1/2 of that persons pension plus the FERS supplement (under 62) or one of our 2 SS payment. So for now we don't need everything we've saved but in the future that over-savings would make up for the loss in retirement income. We'd go from 2 -FERS + 2- FERS supplements (or SS) + Investment income = 5 income streams to 1 1/2 FERS + 1 FERS supplement (or SS) + Investment Income = 3 1/2 income streams. We don't anticipate our expenses to decrease by the same amount especially considering paying taxes in the single bracket.

Also, given your age don't assume that nothing will change with FERS, the FERS supplement, or SS in the next 20+ years. Hopefully your retirement benefits will never be reduced but even a small reduction in those benefits could impact your plan so I'd rather have too much saved and be able to spend more in retirement than come up short.

 

[Aerides]

You're 31, so with 57 as your plan a LOT can change. Life rarely travels a linear path.

So...yeah I'd shore things up now so you can move into early BTD or retire earlier if things change. Who knows what the state of healthcare will be in 5/10/20 years? Let alone all the other things that can change in your plans and life.

You're doing well, so don't burn out. Enjoy some of what you've earned along the way.

 

[Car-Guy]

26 years later your 2.4 million will be worth closer to $1m today's money.

Your worry should be on the opposite end.

 

[Andre1969]

Like others have said, a lot can happen over the course of 26 years. 26 years ago I was trapped in a marriage from hell, that by the time we split in 1996, I was about $30,000 in debt. Yet today, my invested assets are around the $2.5M mark.

I'd say, as long as you're not depriving yourself, keep saving as much as you can now, so that money has time to grow and compound. Then, as you get a bit older, if you realize that your net worth is shooting up faster than you anticipated, you can cut back.

One thing though...once you get used to certain patterns, it can be hard to change them. I've been contributing the maximum, or close to it, in my 401k since around 2005. I'm at the point now, where I could easily cut back, and additional investments probably aren't helping much. At the $2.5M level, market changes have much more impact on its balance, than what contributing another $20-25K per year would do. But, at this point in life, I don't really need the money. If it wasn't going into the 401k, I'd be paying more in taxes, and putting whatever's left in an after-tax account, so I've just left it alone.

 

[Sunset]

Lots can change as everyone has said.

There is a 50% chance OP will be divorced, which will cut OP's savings in 1/2 at a minimum.

 

[jkern]

I'm appreciating so many of ya'lls input on this topic! To clarify my rate of return of 6% is supposed to account for inflation. Since the average return of the market is currently 7% accounting for inflation. I figured subtracting another percent could account for even more inflation than average.

As others have expressed concern about I do not deprive myself. I basically doubled my salary by switching careers and didn't raise my lifestyle expectations by much. All I did is pick up a motorcycle and me and my GF cash flow everything we like to do. Vacation, dinners and home improvements. I also do all home remodeling and vehicle maintenance myself.

All your talk of the unknown factors do bring a good point up. I think I will take a middle road and pay off my truck and not worry about the house. Instead I'll fatten up my savings to a years expenses and then purchase an I-bond. After that I may do a 50/50 split of investing in brokerage and paying down my mortgage.

It seems to be that no one who saved too much so far in here regrets it. And I do like Cocheesehead's point. I would rather not be old and poor lol.

Plus who knows maybe universal healthcare will be here before I hit 57 and I won't need to stay until then for health benefits. I'd sure regret not having enough saved by then.

I would take average rate of return with a grain of salt. During my 24 year accumulation phase the SP averaged 8%. My personal gain was approximately 2.5% due to Sequence of Return (I retired May 2009).

 

[pjigar]

Better to be poor young, than poor old.

Exactly. We have been saving over 50% every year since we woke up in the hamster cage. I want to get off the wheel.

 

[OldShooter]

Better to be poor young, than poor old.

In my adult-ed investing class I include a number of "pop quizzes" designed to make a humorous point. Here is one:

Question: You are 75 years old, in good health, and reviewing your financial situation. Which do you prefer?

A) You find you are running out of money.

B) You find that you have saved a little more than you need.
​

From there we begin talking about the uncertainties of the future, including investment returns and inflation.

 

[pacergal]

Keep saving because you never know.
Your retirement insurance may disappear, the pension may change.
Plan for them both to not be there and be very happy if they are when you retire.

I certainly never thought we would have the lifestyle we have in retirement, didn't count on the pension early in career and just saved as much as we could....Well 36 years later, the pension and retirement medical was still there--Happy surprise!

 

[EastWest Gal]

26 years later your 2.4 million will be worth closer to $1m today's money.

Your worry should be on the opposite end.

But maxing out a Roth 401K and TSP, as well as one's salary is also likely to be tied to inflation, so it is likely the $2.4 million will be a higher number but equal to $2.4 million in today's dollars.

One of the many nice things about a Roth is that you can touch the principal before 59.5 without penalty, just not the gains.

 

[bobbyr]

Better to be poor young, than poor old.

I like that

 

[NW-Bound]

About the advice to the OP to pay off the truck but not the house, I wonder why. Both are at 2.25%.

If OP itemizes taxes the house interest is deductible but a truck interest is not.

We don't know if OP can or does itemize so it's good general advice.

The tax deduction on the mortgage interest of 2.25% is not going to matter, compared to the difference between 2.25% and the 7.12% interest that the I-bond is paying now.

Even if the inflation subsides and the I-bond interest pulls back, it is not likely to be below 2.25%. And if it happens to be in the future and drops below the mortgage interest of 2.25%, the OP can wait till then to pay it off.

Eh, it's over rated. Used to be a common option package on domestic full-sized cars

 

[jollystomper]

At 31, with 26 years to go, it is too early to think about saving too much . As others have said, you do not know what can happen in those years.

When I was 31 Megacorp offered a pension in the future that, given my salary at the time, would have been in six figures by the time i was 51. They also paid for retiree health insurance completely. It tempered my saving, after all, I had those great benefits, right?

Fortunately, I had older, wiser folks who counseled me that "a lot can change in 20 years..." 10 years later the fully paid retirement health benefit was gone, and the pension was cut by more than half (and had I been a year younger, I would have completely lost the pension). I was glad to have continued to save, as well as not ramping up our lifestyle to greatly increase our savings when we saw those things happening.

The major "penalty" is having "too much" in my 401K... with my contributions, Megacorp match, and its growth, my RMDs in 9 years will likely be 6 figures... but this is a "problem" I am happy to have .

Who knows what personal finance impacts may occur in the future... and looking at things like the deficit and the state of SS, it is not likely to be very pretty. Having "too much" is a good hedge against the future.

 

[kgtest]

It's kind of pointless to be looking at possible numbers 26 years from now. There are simply too many variables and too many years between 31 and 57.

Save/invest as much as you can without depriving yourself. In 15 or 20 years you'll have a clearer picture of things.

If you have extra dollars each month, I wouldn't use them to pay off 2% debt.

+1. Save as much as you can unless you have unavoidable expenses. LBYM. Spend wisely. Invest carefully to maximize returns and minimize fees.

I put every dollar I can into investments. With that said, at 40...I am planning on FIRE at 50 to 55 depending on how the world and my accounts and health and kiddos are doing in the next 9 to 14 years.

I doubt I will ever work past 55.

We save roughly 30% of our total yearly income. That doesn't include out mortgage payment which is a 15 year mortgage because I don't want to pay anymore interest from years 16 to 30 like the 30 yr mortgage would call for.

I might buy a second home sometime down the road. I think a lot of people who ponder the old argument, to pay the mortgage off or invest arent always thinking about the possibility of owning multiple homes. I might buy another one or two for my children.

 

[bobbyr]

I might buy a second home sometime down the road. I think a lot of people who ponder the old argument, to pay the mortgage off or invest arent always thinking about the possibility of owning multiple homes. I might buy another one or two for my children.

We have two rental houses and that has been a really great way to diversify (for us). Houses are in a great neighborhood and have provided GREAT returns over the years.

 

[Sunset]

The tax deduction on the mortgage interest of 2.25% is not going to matter, compared to the difference between 2.25% and the 7.12% interest that the I-bond is paying now.

Even if the inflation subsides and the I-bond interest pulls back, it is not likely to be below 2.25%. And if it happens to be in the future and drops below the mortgage interest of 2.25%, the OP can wait till then to pay it off.

Agreed, but OP is limited to $10K investment in I-bonds per person, OP can also pay off the truck, with the remaining extra money.

In 2023 or whenever the truck is paid off, OP can again invest in I-bonds and then work on paying off the house. If I-bonds are still at a good rate.

Basically OP can do both, instead of an 1 or the other.

 

[teetee]

But maxing out a Roth 401K and TSP, as well as one's salary is also likely to be tied to inflation, so it is likely the $2.4 million will be a higher number but equal to $2.4 million in today's dollars.



One of the many nice things about a Roth is that you can touch the principal before 59.5 without penalty, just not the gains.

It would only be true if your salary increase outpace the inflation and have promotions that you manage to save more since your spending also increases because of inflation.

It is a lot easier to increase salary I put and decrease the spending output when you can. When you are older, the chance for controlling the expense decreases (heath issue, relationship issue, child care, etc).

 

[Gumby]

It's a balancing act. Nobody wants to be forced to eat cat food in their old age. On the other hand, life is like a garden -- you need to harvest when things are in season. Likewise, you need to do things when you are physically able to do them. Only you can balance your desires for the present and your fears for the future. Personally, the young wife and I have experienced a very good life. We did the work we wanted to do, bought the house and other consumer goods we needed and wanted, went on interesting vacations and had a lot of fun experiences. At the same time, we did not waste our money on frivolous things and we invested wisely. I'm happy with where we are now. We probably have more than we absolutely need, but there was no good way to know that in advance. Plus, having an overabundance gives us peace of mind.

Good luck on your journey, and remember that happiness is not some mystical destination at which you will someday arrive. It is how you pass through life every day.

 

[RobbieB]

You can never save too much if you are trying to retire ASAP. But then you are going frugal extreme. I was never there. Not MMM style at all.

But you don't want to die at the desk either eh?

Yeah, somewhere in between.

 

[athena53]

Another thought on over-saving: it gives you options along the way. When I was 53, my company was acquired. Some of my coworkers jumped ship as soon as they knew it was going to happen because they panicked at the idea of maybe losing their jobs. I had enough savings that I could handle a few months of unemployment (and there were enough opportunities in my field that it wouldn't extend much beyond 6 moths or so) and decided to stay on. It was a very good decision and I was glad I could take the risk.

More money can free you up to do other things, too, such as start a business or go back to school to re-train in another field.

 

[Gumby]

......

More money can free you up to do other things, too, such as start a business or go back to school to re-train in another field.

I'll second that. I quit work entirely to go to law school in my early 30s. I was able to pay cash because I had saved a lot of money in my 20s, when I was working as an engineer.

 

[Bryan Barnfellow]

Back in the early 1990s my wife and I were starting to move full steam ahead on our intense saving/investing plan for FIRE. We had close friends who cautioned us about "living for tomorrow instead of today." They once asked if we shouldn't have an intervention by friends to get us back to our senses. :0

But we were undeterred. We were enjoying our life with simple pleasures occasionally dotted with luxurious splurges. Our greatest joy was working together toward our shared goal and watching the nest egg grow. We never felt majorly deprived. The thought of us both being very old with declining strength and likely some illnesses made us more determined than ever to be sure we at least had the finances to make our lives easier.

Skipping ahead a few decades, we have been happily FIRE'd now for more than 6 years and they are still working. They now say, "You guys were so right. We're sorry we didn't pay attention to what you were doing and learn from you!"

So, I suggest you save as much as you comfortably can, and don't worry about saving too much. It takes a lot of worry off the table.

-BB