Saving too much?

[Eagle43]

This is a tad different than the usual malarkey concerning saving. This one postulates that we should spend more and save less for retirement. The article says that you will be able to enjoy it more while you're young. This does sound a tad like C-T's balance theory. Of course, most Americans don't need prompting from the NY Times to spend more.

This Contrarian View from the Times article should have a warning label on it.

Quote: The argument between the sides is similar to the classic debate between the hardworking ants and lazy grasshoppers of Aesop’s fable. The financial planning industry says saving, even too much, provides a safety net and peace of mind, and possibly a gift to heirs at the end.

The economists answer that people would get more out of their money by using it when they are younger. “There is risk in saving too much,” Mr. Kotlikoff said. “You could end up squandering your youth rather than your money.”
Unquote
That last line sound like "don't get to be 80+ years old and have 1/2 million bucks invested. Spend it while you can enjoy it."

 

[Martha]

At least the article calls into question the rule of thumb that you need 75 to 85% of your preretirement income during retirement. If I followed that rule of thumb I would have a mightly hard time retiring too.

 

[Mr._johngalt]

You all know my story. I too thought of C-T when this topic came up.

Looking back, I don't feel a bit deprived based on the "saving"
I did in my youth (really didn't do any); nor do I feel a bit deprived now, even though I have
scaled way back from my "salad days". Pretty much sailed through life
doing what I wanted, when I wanted (both ex's will confirm this). It's been quite a party.

JG

 

[DangerMouse]

I've never believed that it is necessary to save 75-80% of your pre-retirement income to be able to retire. Like Martha, if we followed that line, we would be working until we are 60 to accumulate money we will most likely not need.

However, I see article as such being designed to encourage people to consume and ensure that they keep working and firing up the economy with their spending until the day they retire. I wonder how the couple who just bought the house and are counting on that feel about the woman who is only 10 years older than them but is in the position to retire because she did save?

 

[maddythebeagle]

maybe the NYT should have read this thread first: http://early-retirement.org/forums/index.php?topic=11455.0

 

[dumpster56]

You all know my story. I too thought of C-T when this topic came up.

Looking back, I don't feel a bit deprived based on the "saving"
I did in my youth (really didn't do any); nor do I feel a bit deprived now, even though I have
scaled way back from my "salad days". Pretty much sailed through life
doing what I wanted, when I wanted (both ex's will confirm this). It's been quite a party.

JG

I kinda like this post. Very reasoned.

 

[Texas Proud]

The problem I see with this article is that it will give the people who don't want to save enough an excuse not to save.... and the people who DO save enough won't change as it is not in them to do so...

I am now saving a lot more than I 'need'... but I don't have anything that I want to spend it on that makes sense to me... I don't see value in buying a HDTV yet, but will do so in a few years when the prices come down... I don't see value in cable TV, but might do so at some time...

I don't see value in dropping $40 to $100K to 'update' my house when the dang thing is only worth $130 or so.. I would rather move to a house that is 'better' and have a higher value... but I don't want to do that either!!!

The negative on this article is that the people who follow this advice and live to be older will not be able to sue them for bad advice since it will be many years before they know it was (or could be) bad..

 

[d]

The economists answer that people would get more out of their money by using it when they are younger.

this suggests that an individual will get more present value "utility" from current than from future consumption, which is most likely true for most all individuals. but, this fails to recognize that current savings also provides "utility". further, it fails to take into account "diminishing marginal utility".

 

[lowflyer]

The problem I see with this article is that it will give the people who don't want to save enough an excuse not to save.... and the people who DO save enough won't change as it is not in them to do so...

I didn't read the article, but I understand the concept. I certainly don't "worry" about saving too much or not spending enough, but it is something that I have been thinking about more lately. I think TP's point above pretty much sums it up for many of us. The habit of saving and LBYM is just that...a habit. It's hard to do differently.

My parents are in their mid 70's and have managed to accumulate a nice pile of $$$$. Unfortunately, both grew up in families with little money and just "inherited" the habit of living "small" and saving. They will absolutely die with the most money they have ever had. I suppose that's good for my Brother and me, but is that really the way it should go?

Just last week, DW came home from her PT job and told me of one co-worker who died the day before and another who was shipped from work to the emergency room that day with a heart attack. Both women were in their early 50's. We've all heard these stories before, but it does make you think. DW thinks we should not hold back and try to enjoy ourselves while we can. Of course, that doesn't always involve spending money, but you get the point...

 

[d]

I didn't read the article, but ...

then it would be wise to note that "Mr. Kotlikoff is trying to sell his software, called ESPlanner, to large employers as well as to the financial services industry. He has made no major sales so far. It is also available to individuals at www.esplanner.com for $150." i played with this a while ago, and was particularly put-off by the reliance on insurance products, to which i am personally averse.

 

[firewhen]

The whole % income needed in retirement thing never made much sense to me. If my income doubled, my expenses would not double. If you LBYM, it is best to figure what you have spent in the past and would like to spend on in the future, and that is what you need.

I also don't care much about what the article says. I know many people personally who are in their late 50's and 60's, some whose health is so-so, who would love to quit working, but must wait for SS and Medicare to have a chance to get by with what they have saved.

The only down side to saving too much is if you truly deprive yourself as you go along. As long as you live reasonably well to accommodate your tastes, extra savings can always come in handy.

For us, if we did not save over the years, FIRE would not even be a thought.

 

[donheff]

I wonder why no one seems to ever find any of the proverbial old folks who are unhappy because they saved too much? I don't recall ever seeing one of them interviewed.

 

[d]

anyone here who feels that they have saved too much?

 

[cute fuzzy bunny]

No, but I'd hate to see someone hang on until they hit 100% survivability with their worst case budget scenario.

I think people are flexible enough and smart enough and able to improvise enough to get by on maybe an 80% survivability. Maybe even 60%.

 

[SteveR]

Too much or too little savings is all relative to where you start your savings plan in relation to your retirement date. Current and future expenses should dictate how much net egg you need to sock away before you pull the plug along with your personal "risk tolerance."

Saving too much would only be a problem if you were emotionally and physically injured due to deprivation. Or if your SO left you because you were too stingy and turned into a miser. We each have our own level of need for spending to buy the stuff that makes us happy beyond basic living needs. Some won't be happy unless they can have the best of everything while others would be fine with 'possum' living. There is no right or wrong to this; only what works for each of us to meet our personal needs and expecations.

Some choose to save a ton so they can ER in style. Others take a more balanced approach and save enough to meet a certain time frame or age expectation. Others spend too much and can't save enough to ER. It is all sort of like pay yourself now or work longer than you would like. Again, it is a personal thing and we each have our own goals and means to get to the goal of FIRE.

 

[Gone4Good]

anyone here who feels that they have saved too much?

Tell me when I'm going to die and I'll tell you whether I've saved too much.

 

[figner]

I agree that "saving too much" only becomes a problem if it feels like deprivation. Having gotten a decent job straight out of school, I went through several years of buying all kinds of gadgets, computer equipment, etc. It was fun, especially after living on a student budget, and still within my means. But after a while I decided to prioritize saving more, and after a few years realized I didn't feel any less "happy" with my life than when I spent lots on toys. There almost seems to be a "conservation of happiness" thing where I can spend lots or little on entertainment, but overall I seem to have as just as much fun now playing with the few gadgets I find worthwhile. I seem to get more intensely involved with the toys I already have, and looking forward to getting a new one while saving up for it also carries its odd sense of satisfaction.

Same thing seems to apply for home decor, eating out, and most things I consider luxuries. Spending more can be more fun in the short term, but doesn't seem to impact my long term happiness much.

 

[Nords]

anyone here who feels that they have saved too much?

Sure, but only in hindsight.

At the time I was making the irrevocable decision it seemed that the amount we'd saved was "just right" and we hoped calculated it'd work.

I'll say it again... if I'd taken the time & trouble to learn more about the Navy Reserve when I was on active duty then I probably wouldn't have lasted past the 11-year point of starting a family. Ironically I was surrounded by Reservists at the time and opportunity was knocking like a John Bonham & Keith Moon duel.

 

[ADJ]

There could be such a thing as saving too much and deferring gratification and yes there are so old people that regret not taking advantage of certain gratifications in their youth. I once met a man about 70 on my way back from Europe. He told me he was on his way back to the US from a tour of Israel and Turkey. I asked him if he had a good time. He replied, at this age, it's hard to have a good time on a trip like that. He went on to say, what's the point, you save and you wait until you retire to do stuff like but then you don't have the energy to do it. I think this could be said for a lot of people who keep working and working because they could never reach the FIRE goal they've set and when they finally retire, they really can't enjoy much.

 

[free4now]

As CFB says, it all comes down to what level of risk you are willing to take. If you save enough for say 90% survivability, then 9 times out of 10 you saved too much, looking retroactively. The article didn't say what kind of survivability they were looking for, which is my beef with most financial articles. They present some plan but don't give you any indication of how likely failure is with that plan.

Sure if everyone is okay with 50% survivability, then we can reduce our savings enough so that shortages occur just as often as overages. But I don't want that risk.

 

[Shawn]

The article says that you will be able to enjoy it more while you're young.

This statement from the article is unfortunate. I'm regularly around people in their 70's and 80's who are, for example, more physically active than the typical 25-year-old. These people can do things that most younger people would consider difficult to impossible. There is no reason why an average individual cannot have an extremely active and fulfilling life well into their 90's (at least). It takes planning, not just from a financial perspective but also from a health and lifestyle perspective.

I do not believe a person can save too much, unless they are saving to a point that it creates an unhealthy situation (not spending on necessary medical treatment). By and large, people who are heavy savers are also people who know exactly where their money is going. The problem is with those individuals who do not save, but think that it will all magically work out in the end.

A frugal person who stocks away considerable cash and investments can always ER. I'm 47 and drive a 27 year-old car that has a small cost to maintain and insure. The car does what it's supposed to do, which is get me to where I want to go. However, the article implies that I would be better off and happier if I spent these savings while young. Because I LBYM, I can ER today at 47 (although it likely will be at 50). The freedom and personal flexibility that the LBYM lifestyle gives me is, as they say, priceless.

 

[work4beer]

While I agree that variable spending after retirement should be considered, there are two huge problems with this article (i.e. the example in the graphic):

1) It assumes you have a pension. A pretty generous one, since they are assuming $12K from savings, lets say $12K from SS, which means they're assuming a $46K pension. The danger is people w/o pensions will look at that $400K number and think they are on track, when actually they will need an additional $920K or so.

2) The idea that any couple should have only $50K in savings at age 55, right when you're at the age where it's the hardest to find a job if disabled or laid off, is just plain reckless.

 

[haha]

I think this whole question is ridiculous. We all have wants, almost all of us including the lucky few on this board have satisfied many of those wants over the years, and continue to do so.

If someone wants to pile up his or her money, maybe they like the feeling of security, or power, or whatever more than they feel that they would like whatever they might be able to buy with the money.

I think people usually try to get what they think they want. Do we criticize someone who likes a short fat woman, and tell him "hey stupid you could find a tall thin one?"

Of course not, we think it must be what he likes in women and unless we are insufferably arrogant (which some of us may be ) we figure that he is allowed to make that choice.

Why are people who choose to save more than we ourselves might save such a frequent target for complaint on this board? After all this is a board about LBYM and getting free of the system. These so called misers have done that in spades.

Ha

 

[Nords]

- We had breakfast yesterday morning with a few older friends of mine. One of these guys is 82 years old. He has had a bad year. He had both eyes operated on for cataracts recently (a success). But the rheumatoid arthritis he has put him in tremendous pain, he was recounting the many drugs, maladies and surgeries for about a half hour. he has lost all of his teeth due to some powerful drug side effects etc. etc. The rest of us realized that this guy does not have long to live without assisted living, as he cannot do much by himself any more.
Now this guy has over $3 Million Liquid. He has no heirs. But this guys hobby was saving money and watching the pile get bigger. He still saving from his pension and S.S. He remembers the depression and that is part of his psyche. He truly hates spending money. Spending money gives him more pain than joy.
After he quit talking about his health he was recounting a problem he had with his tires on his car. He had 40,000 miles on them! - He said maybe he would try and find some used wheels at a junkyard. - Someone suggested why don't you just buy a new set of tires and be done with it. A grimace came over his face, like we punched him in the gut! We're all thinking someone needs to take the keys to the car from him! - I'm thinking 'If had his limited time - I'd just buy a new car!
He went on a trip to Alaska fishing with us about 13 years ago. Every other day he would say something like 'I'm paying $400 a day for this' 'I wonder what each fish I catch is costing me?' - He never enjoyed himself when he was there! He just never got over the cost of the trip.
This guy would say he probably should have saved more money. He would also tell you that he should never have gone on that trip Alaska, as it cost him close to $4,000! - He really, really hates to spend money! Everyone is different and this sure is not how I live life! Takes all kinds I guess

Too bad he didn't pick up the breakfast tab-- you guys sure paid for that meal in more ways than one. Sounds like you need a new "friend".

Spouse has been working with the guy whose Navy Reserve billet she's taking over. He's pulling down high fives/low sixes in a military civil-service job where his experience & contacts guarantee him lifetime employment. He's also been drilling in the Reserves for well over two decades and will probably start pulling down a $40-$50K COLA pension in about 10 years... this is in addition to his civil-service pension and his TSP account.

But his military uniform is always well-worn and a bit ragged. His shoes have holes in the soles. When they were doing the physical fitness test, he was wearing a t-shirt & shorts that should've been in the rag bucket (I speak with some experience here). Spouse held his feet for the situps and his running shoe tore in her hands. He brown-bags his lunch and doesn't go out for travel meals (despite his food per diem). His car makes ours look new! He's enthused that he's now allowed to stay in the Reserves past the 30-year point and he'll probably drill until he's 60 years old.

Other Reservists say that he owns a half-dozen rental properties and is just as tight-fisted in work and at home (single guy, no kids). Judging from the pay scales & real estate values he's easily worth $2M even if he's paying alimony. But he just can't turn it off! It'd be one thing if he waxed enthusiastic about the inner-city kids he's helping or the charitable foundation he's building. Instead he looks like he's one step away from living on the streets and he seems to lead a cheerless existence.

I think this whole question is ridiculous. We all have wants, almost all of us including the lucky few on this board have satisfied many of those wants over the years, and continue to do so.
If someone wants to pile up his or her money, maybe they like the feeling of security, or power, or whatever more than they feel that they would like whatever they might be able to buy with the money.
Why are people who choose to save more than we ourselves might save such a frequent target for complaint on this board? After all this is a board about LBYM and getting free of the system. These so called misers have done that in spades.

I think the dividing line is between frugality & deprivation.

It's one thing to be quietly frugal for your lifetime and bequeath gazillions to the local schools or Humane Society.

It's quite another to socialize with Cut-Throat by ceaselessly complaining about one's problems and the cost of entertainment. (They didn't kidnap him and force him to make the fishing trip.) Instead of spreading the joy about their frugal bargains (or the "free" fish), "deprivites" choose to complain about the cost of everything. There's clearly a control problem there, just as much as if someone's an alcoholic or a drug addict, and they're clearly not having a happy experience with money.

Reminds me of the proverb about knowing the cost of everything and the value of nothing. But maybe people like this just remind me too much of my parents-in-law.

 

[d]

so some of you know people who you think have saved too much ... do they think they have? have you saved too much?