Saving too much?

[Scanner]

http://finance.yahoo.com/expert/arti...neyhappy/24438

I enjoyed this article.

I particularly liked the comment about short game and end game.

I have got to get that www.endlesspool.com

[tinapbeana]

i liked the part at the very end the best:

I suspect I'm one of the dupes who's saving too much for retirement. For years, I've followed a "rule of dumb" -- putting away 10 to 15 percent of my income annually. My goal is to replace 80 percent of my current income in retirement, excluding home equity and Social Security. (I'm dubious about the program's long-term sustainability.)


I may need less than 80 percent of my current income, since many of my costs will disappear in retirement: school tuition, college savings, the kids' extracurricular activities, the mortgage (and I won't need to save for retirement anymore).


But I err on the side of caution, because saving for retirement squeezes out luxuries -- a second car, better vacations -- rather than necessities. Economists should turn their research into more accurate models for people who could use additional funds today to stay out of credit card debt, or pay for education and other staples of life.

[Ima saver]

I don't believe people are saving too much. Why are so many men over the age of 70 still working. It says that 1/3 of all retirement people depend on social security for 90% of the retirement income. I don't want to have to live on $500 a month for the rest of my life.

[Broken Arrow]

Yeah, this "contrarian view" of saving too much for retirement is making the rounds and getting quite a bit of press as of late.

I've said it before, and I'll say it again: I think this notion is utterly preposterous. Preposterous!

If one plans on retiring, say for 20 years starting at age 65, and decide that it would take a minimum of 30k a year to be able to retire comfortably, that basically amounts to no less than $600k in retirement savings. And that's the bare minimum!

Yes, I know this math is being overly-simplistic, but I don't think it's unrealistic and enough to get the point across. This is especially true if you consider someone like me, who won't be retiring for at least another 30 years. By then, that 30k a year will only be worth 15k in today's money! In my mind, if I don't hit at least a million in retirement, I highly doubt I'll be retiring on time and in comfort.

I also contend that I am not squandering my youth. There are some things that I still enjoy that costs me quite a bit of money. Specifically, I've decided that I enjoy dining out too much to have it cut out of my budget. Admittedly, part of that has to do with coping with divorce, but reasoning aside, the point is, I cut back on places that isn't as important to me, and I keep those that still are. I think the term "squandering" is a bit harsh.

Actually, I take that back. Yes, I do think that the youths today are in fact "squandering" it. How you ask? By not minding their finances as closely as they should. Like the cautionary tale of Pinocchio, our excesses can end up imprisoning us through borrowed money, and thus, borrowed time. Borrowed time! Exactly the thing that these contrarian doomsayers are warning us against.

In my personal opinion, pushing hard towards your retirement savings for example, is exactly what you WANT to do when you are young. You can get away with so much more when you're young. You can work longer, not get fatigued from it as quickly, and you have time to recover from life's setbacks, and do it much more quickly.

Plus, by pushing hard early, you actually BUY BACK TIME(!) by giving your money time and the boost it needs to COMPOUND! And anyone with any basic knowledge in finances knows that compounding interest is argueably the most critical component for long term financial growth.

Now, I know that some will say, "Oh, but what if you die before you can enjoy it?" Yes, that can and does happen, but ever since I was 16(!), a great high school friend of mine has been saying that. "Dude, what if I get run over by a bus tomorrow? You gotta live life now! Carpe Diem!" The last time I heard him say that was when I visited him last Novemeber... almost 16 years later. He's a great guy, but the manner he's been seizing his days has now caused him to become TRAPPED in a mountain of debt! His accountant wife has confided in me that it will take at least 5 years before they have enough room to start saving! Things are so financially dire for them that they've even gone as far as taking out loans against their 401k.

I don't know about you, but I INTEND to live long enough to fully enjoy my retirement and then some. Besides, the statistics of accomplishing just that stacked well in our favor. I myself have been beating the odds for a good 32 years now. And again, I don't think that I am making myself miserable due to frugality. In fact, most of my misery has nothing to do with frugality believe me.

Better yet, if you work hard enough and early enough, you may even have the luxury of being able to semi-retire or even retirement early! Think about that. Even though my parents have made decent money, they were also frugal. Now, as they approach their 60's, they're thinking about retiring early. Why? Because they can!

That said, I won't go so far as to say that these doomsayers are entirely wrong. There just may be some who already have a nice, healthy nest egg, and could probably stand to enjoy money a bit more in their lives. I suspect it's a very small minority that fits in this category though.

Some day, I would like to do that too. BUT! In order for me to get to that point, I must push hard first, while I'm still young, until my nest eggs are indeed large enough for it to take over and grow on its own. Then I'll be more than happy to ease up and enjoy my life a bit more. And I'll be able to do so comfortably, knowing that money is working for me rather than the other way around.

And don't even get me started by implying that I don't have a short term and mid term financial strategy. They can be surmised quite easily by reading my signature. But that's enough ranting from me for now.

[Scanner]

I think the contrarian view does have actually have some merit and isn't all about press.

I'll speak to this from my perspective as a chiropractor, with Medicare aged population maybe that's 15% of my practice.

When you get to be 65, truthfully, your life becomes more about going to the doctor (whether a DO, DC, MD, DDS, DPM). These people are up at 4:30 am wondering why I'm not open at 6 a.m. Okay, that's an exageration but truth be told, you are probably going to have some problem into Medicare years - whether its adult onset diabetes, a bum knee, a bum back, hypertension, prostate problems, etc.

I think squirreling everything away for that someday when you are going to do a grand tour of the world courtesy of Princess Cruise Lines is unrealistic.

What makes this group of people happy in my practice, especially males, not as much, females, is to contribute to society in someway. They come to me once/month, visit the family doctor next door to get their blood work done and all. . .and work producing something.

What that translates into: working part-time. Maybe for a female, it means running for mayor or serving in charity or answering the phones somewhere. The rest is usually spent visiting and playing with grandchildren. Men usually want a paycheck.

What's my point? I think most of these retirement formulas of needing 2.5 million dollars to maintain your lifestyle, yadda, yadda, are bullpucky.

That's assuming you turn 65 and PLOP!!!! You sit on your rumpus, day in, day out, watching Jerry Springer re-runs.

[LivingAlmostLarge]

Not addressed is the loss of pensions and employer paid healthcare. How will some 20-something retire at 65 without a pension? They have to cover themselves with 401k/Roth IRA. The truth is that people nowdays don't have a defined benefit plan like before. SO it's tough to compare a retiree of today with a retiree in 40 years.

[disneysteve]

Scanner - I think you make some valid points but I also think you are missing some things.

1. Only about 20% of workers have pensions today. Years ago, the figure was more like 80%.

2. Overall, people are living longer, healthier lives. My mom is 76 and is in great shape, still driving, traveling, working part-time, etc. I have patients who are still working full-time jobs in their 80's (not because they want to but because they can't afford to retire).

3. That $2.5 million is in today's dollars. Factor in 20 or 30 years of inflation and that number isn't as high as it sounds.

4. We have no idea what we will get, if anything, from Social Security when we retire. so we need to save as if SS won't exist.

5. The big unknown is the future cost of healthcare. As you pointed out, for many seniors, healthcare becomes a major issue. If I need to cover more of those costs on my own in the future, I need to be saving for that today.

Ultimately, it also depends on what type of retirement you envision yourself having. I know numerous current retirees who travel quite extensively and these are not folks who earned high wages during their working years. But they lived below their means and saved for the future and are now enjoying the fruits of that labor. Of course, I also know retirees who are quite content to putter in the garden, spend time with family and go out to eat once in a while, and they need far less money.

I doubt many people retire and say, "Boy, I've got way too much money." But I'm sure lots of people say, "I don't have nearly enough."

[Broken Arrow]

I respect all viewpoints on this and just about any other issues, but I stand firm in the belief to save as much and as early as I possibly can.

Later on, if I should turn out to be wrong, I'll gladly lower my contributions and savings, and spend it on myself. That scenario is much more enticing to me than if I should be wrong the other way around, where I'm not saving enough, and by then, I would have even less time to do so.

[Scanner]

I doubt many people retire and say, "Boy, I've got way too much money." But I'm sure lots of people say, "I don't have nearly enough."

DisneySteve,

Many say the same thing about sex too.

It's in human's nature to always want more.

I think one can become consumed with not consuming.

[disneysteve]

Originally Posted by Broken Arrow

I stand firm in the belief to save as much and as early as I possibly can.

The "start early" advice is incredibly important. Just look at a simple example.

A: Invest $1,000 in stocks at age 25. Get an annual return of 10%. At age 65, you will have $53,700.

B: Invest $1,000 in stocks at age 45. Get an annual return of 10%. At age 65, you will have $7,300.

C: Invest $5,000 in stocks at age 45. Get an annual return of 10%. At age 65, you will have $36,600.

The point is that if people would start early, they wouldn't need to save nearly as much as those who wait until later to start thinking about retirement. The person who waits to get started may never be able to catch up with the person who started early, even if the late starter invests a lot more money.

[scfr]

Living costs in retirement may go down for a bit, but if you get to the point where you need to go in to an assisted living facility or a nursing home, then they are going to rise dramatically.

All of my grandparents saved and lived frugally all their lives, tho' they did enjoy life and helped others too (in other words, they were not misers). When the time came, they were able to choose an assisted living center (for one pair of grandparents) or a nursing home (for one grandfather) based on where they would be comfortable and happy and get excellent care, not based on what they could afford.

My goal is to have the same luxury of choice for my husband & I. I assisted my grandparents with managing their finances near the end of their lives and it was a big eye-opener for me; it taught me that it is better to defer some indulgences now for a safe & comfortable old age.

[sweeps]

scfr = safe and comfortable future in retirement ?

[disneysteve]

Originally Posted by Scanner

It's in human's nature to always want more.

It isn't about wanting more. It is about financial freedom, options, choices. I don't want my lifestyle to be dictated by the size of my social security check. I also don't want to still be working full-time when I'm 65 or 70 or 80 because I didn't save adequately when I was younger.

I have all that I need today. I have a nice home. I vacation regularly with my family. We have 2 older cars that work fine. We dine out occasionally. Sure, there are lots of things we could spend money on but choose not to. I would much rather invest that money for future needs and know that I'll be able to retire at a young enough age to still enjoy myself.

[scfr]

Originally Posted by sweeps

scfr = safe and comfortable future in retirement ?

I like that! It was originally for "Smart Couples Finish Rich" but maybe I'll adopt your version sweeps!

[family_of_seven]

I firmly believe it's all attitude and people will always find a way to rationalize what they want ... to be "happy" now! Our culture has been bred to accept the consumeristic attitude of you deserve it so get it now. We do that through credit card spending. Reality is we do those things that comfort and give us security. The credit card crowd does it through deficit spending for things to comfort now while the savings crowd does it by creating security for the future. All things being equal who will be leading less stressful and joyful lives 20 yrs for now? I agree with the sentiment stated earlier, if I saved too much I better figure out how to fix my mistake and spend it....what a problem to have

[LivingAlmostLarge]

Hmmm..disneysteve why do we seem to think alike? Interesting that you are a few mintues behind me. LOL.

Anyway I live almost large because I think in a couple more years we'll be set for life and we can live as large as we like by not living that way now.

[tabbycat31]

the article mentions a lot about how Social Security will be there. At my age, I am not counting on it. I just recontributed to my IRA, and I was very happy wtih the results.

I'll do what I can, and anything extra will be nice.

[humandraydel]

I think Scanner is right on one point - the need to enjoy life. But that is EXACTLY the reason I advocate saving so much at an early age. Once you hit 35-40 you are sailing smooth and can enjoy life much more. There is no way I'd be "enjoying life" if at age 40 I was in debt with little savings.

[project15]

I'm young. I save 10%. I don't feel that I'm squandering my youth. Sure I'd like the big plasma tv and other things that I'll enjoy right now, but the fact is...I'll enjoy them more in the future knowing that I can buy them when I'm old and still be OK in retirement

[disneysteve]

Originally Posted by project15

I'm young. I save 10%. I don't feel that I'm squandering my youth. Sure I'd like the big plasma tv and other things that I'll enjoy right now, but the fact is...I'll enjoy them more in the future knowing that I can buy them when I'm old and still be OK in retirement

Good for you!

I think you touch on a big problem. Kids (okay, young adults if you must) who get out on their own for the first time and want to immediately duplicate the lifestyle they had while living with their parents. They just don't comprehend that their parents didn't live that way at that age. My daughter is 11 and all she has ever known is the lifestyle we have today - nice house, nice cars, frequent vacations, dining out, and a 6-figure income. She wasn't around when I lived in a 1-room efficiency apartment with a sofabed (bought used), a desk (found in the trash), a chair (given to me by a college friend) and not much else. Oh, and I shared that apartment with a family of cockroaches. As a parent, part of me doesn't want her to ever have to live like that, but another part of me recognizes the tremendous importance of working your way up in life - not having everything handed to you from day one - and learning to appreciate what you have.