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Is there such a thing as saving too much?
Old 12-07-2021, 05:49 PM   #1
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Is there such a thing as saving too much?

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.
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Old 12-07-2021, 05:53 PM   #2
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It's good to have more dough to spend in your retirement as compared to your working days.

I've spent more than I made every year since I retired -
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Old 12-07-2021, 05:57 PM   #3
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Have you taken inflation into account when judging the value of your retirement income? If annual inflation averages 3% to 4%, prices by then will be two to three times what they are currently.
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Old 12-07-2021, 06:01 PM   #4
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26 years later your 2.4 million will be worth closer to $1m today's money.

Your worry should be on the opposite end.
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Old 12-07-2021, 06:07 PM   #5
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We’re spending more than we planned now because we can. We view giving to help others is also important given our situation. That said, you’re very young. You have a plan, which is great, but life rarely follows a plan. You can’t plan for the unknowns.
If you’re comfortable with your lifestyle, you may want to continue to build up your retirement nest egg and a taxable account nest egg that would help you to support yourself and your family should the unexpected happen. Life plans can change in the blink of an eye. Health issues, disability from an accident or disease, needing to be a caregiver for a loved one. Having that nest egg to support yourself and your family is priceless.
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Old 12-07-2021, 06:07 PM   #6
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Your thinking is very sound. The only thing to remember is the old rule "No plan survives first contact with the enemy." In your context, this means that a lot can happen in 25 years, so your retirement plan is not a ship that you can launch and forget about. Just watch carefully -- annually is good, manage your asset allocation to suit your time to retirement, stick with a Bogleheads portfolio or similar, and history says you'll be fine. Remember Warren Buffet's advice, too: "Much success can be attributed to inactivity. Most investors cannot resist the temptation to constantly buy and sell. ... Lethargy bordering on sloth should remain the cornerstone of an investment style."

Regarding paying down the house loan, that is debated endlessly here. My sense is the most believe as DW and I do, that being debt free is a very satisfying feeling and that interest rate arbitrage is an uninteresting hobby.

Regarding the truck loan, I think there is at least a strong minority here, including DW and me, that thinks car loans and leases are deals with the devil to be avoided at all costs. Other than my first (used) Porsche right out of grad school, we have never bought a car that we could not afford to pay cash for.
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Old 12-07-2021, 06:37 PM   #7
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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.
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Old 12-07-2021, 06:38 PM   #8
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Quote:
Originally Posted by J277 View Post
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.
about the only thing I'd do in your place is hold off on savings temporarily, pay off the mortgage and any other long-term debt (credit cards, school loans, etc), take on no new debt and then resume savings and investment. but that's me. otherwise, you're doing fantastic. and to answer the basic question...no, you can't save enough unless you're denying yourself basic life support.
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Old 12-07-2021, 06:45 PM   #9
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Your thinking is very sound. The only thing to remember is the old rule "No plan survives first contact with the enemy."

Or in the words of a squeaky voiced boxer,


Everyone has a plan until they get punched in the mouth.


Life will do that to you sometimes.
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Old 12-07-2021, 06:49 PM   #10
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Better to be poor young, than poor old.
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Old 12-07-2021, 07:07 PM   #11
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Without going into detail, but to give my perspective on the main question in the title to the thread, I'd answer as follows. Save as much as you can, but without depriving yourself of a life. In other words, save until it hurts, then back off a bit, and allow yourself some fun and luxury. As long as you enjoy yourself and have a good life while in the accumulation phase, you are unlikely to regret having saved "too much" when you're retired. (Oh lawdy, why did I save all that money? How terrible. I should have saved less. Not!)
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Old 12-07-2021, 07:09 PM   #12
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Why do we save? I like the succinct answer from Morgan Housel in his book, The Psychology of money. We save to reduce risk.

Keep socking away the money (provided you have at least 50% in stock index funds), and if you have loans under 3%, don't pay them off early.

The balance point is to maintain happiness. Spend enough that you are happy. Save enough that you are happy. If these two conflict, then re-examine lifestyle & career choice. It sounds like you don't have a serious conflict here... Good Luck!
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Old 12-07-2021, 07:10 PM   #13
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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. Got DS through college with no loans.

Your priorities, of course, are different, but it sounds like you have a good quality of life even with all you're putting aside.

I retired 7 years ago at 61. As others have said, it's a joy to be able to spend money on "wants" and help others when you see a need. I just sent $15,000 to DS and DDIL because I can't take it with me and I've made great progress in funding 529s for their 3 kids.

More money is better than less money.

PS- take a look at the discussion on unplanned, unavoidable expenses!
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Old 12-07-2021, 07:34 PM   #14
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Right now I could live on the dividend that my stash throws off despite the current meager 1.3% dividend rate of the S&P. It means I don't even need the capital gain of the stocks, and this of course dwarves the dividend. It also means our SS added on top is that much more gravy. And don't get me goin' on the option premiums I make by trading. Heh heh heh...

Even so, I do not think I saved too much. I am just lucky to have gone through a few bull markets. It could easily have ended up not so glorious. Heck, things may change next year. We just don't know.

The main thing is you don't want to feel deprived while you are saving. I never did.

About paying off the 2.25% loans, don't. If you don't like the market at this point, just buy the ultra-safe I bond which currently gives you 7.12%.
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Old 12-07-2021, 07:40 PM   #15
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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.
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Old 12-07-2021, 07:53 PM   #16
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Just to add one more, I would for sure pay off the car loan. I always did a refi to 15 year mortgage on our homes but I carry a mortgage at 3,625 rather the. Taking the funds out of investments and I retired 3 years ago. My deal is no loan on a depreciating asset.
My “guaranteed” income is almost enough to fund our spending so we would fall into saved more than we needed to but enjoyed our years when we were saving.
Spend enough to enjoy life today but my advice is to live below your means, but not by depriving yourself or family.I’m not worried about having saved too much but I’m comforted by not having to worry about money.
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Old 12-07-2021, 08:36 PM   #17
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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.
@J277 No such thing as saving too much. And it's good to enjoy some discretionary things in life. How much money is discretionary is up to you.
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Old 12-07-2021, 09:06 PM   #18
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Originally Posted by mrfeh View Post
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.
That's great advice. Continue to invest & save until you retire at 57. You won't regret it.
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Old 12-07-2021, 09:41 PM   #19
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I have to agree with Major Tom. Save as much as you can but don't cut back so much you end up torturing yourself and being miserable. We were workaholics and we were so buried into our work we never got around to spending our stash. One thing I want to add is some things in life is age-appropriate and you only have one chance when you're at the right age. A example of that would be like music concerts. I regret not spending some money in the 70s, 80s and 90s and seeing some class acts. Sports cars are another. There's a difference between being 30-something and driving a 911 vs. being 60 and driving the same car.
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Old 12-07-2021, 09:48 PM   #20
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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 was going to suggest the exact approach you decided upon to put half the amount you were going to and pay off the truck early and leave the mortgage as is. Then when you pay off the truck, take the actual truck payment and put that to reducing the mortgage.

I do like the I-Bond suggestion. I had purchased my max amount in November and will purchase the 2022 max in January. Glad the various replies were able to get you to your comfortable position.

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