Can a Person/Couple Save too much?

[skives]

My wife (34) and I (40) are debt free (everything including the house). We make about $83k a year combined. We contributed 15% to Roth 401Ks. Starting next year we plan to also put money into our Roth IRAs. We can do the max $7k each but I’m wondering if that is too much based on living life now (vacations and things we want to do for fun) and saving for future expenses like a new used vehicle for me and maybe upgrades/repairs to our house. Based on my budget we will have about $25k free per year. We don’t buy anything unless we have the money in cash to pay for it.

what do you guys think are we saving too much if we max out our Roth IRAs?

[myrdale]

Congratulations on being in this good of a position. With 15% already going to the Roth 401K your further ahead on your savings than probably 95% of the population. I only have 10% going towards mine personally. If you can max the Roth IRA out also, you will be setting yourself up for a very nice retirement hopefully one day.

I am of the opinion that for this coming year as a test, you shoot to max out the Roth IRA accounts. Just for one year. See how much wiggle room that gives you in your budget then work from that for the year after.

I believe the general strategy retirement savings is:

1) Meet your employer's match for the 401k.
2) Max the Roth IRA.
3) Max the 401k.

Since your 401k is a Roth, I don't know there is really any preference between maxing the Roth IRA or just putting that extra towards your Roth 401k.

Now to your original question, are you saving too much money? I don't think anyone can really answer this but you.

My single largest expense is food, and a good portion of that is eating out. It's on the order of $10k per year. I could decide today I will never eat out again, and only make sandwiches and put another $9k towards the 401k every year. That would be HUGE!! Yea but I am not going to do that.

I've spent a good bit in the last couple of years on hobbies, bee keeping, caving gear, computer network stuff. That's a large chunk I could have put towards the 401k instead, but I didn't.

A few years back I saved up and (nearly) paid cash for a new pickup truck. I could have purchased something for 75% the price or less I am sure and put the rest towards the 401k instead, but I didn't.

My main point is be deliberate in your spending. Know where your money is going, throttle back where you think you need to, and your savings will grow.

[disneysteve]

If you continue 15% to the 401k and max the Roths, what overall % of income will you be saving? And what non-retirement saving are you doing?

The great thing about the Roth IRA is that if absolutely necessary, you can always withdraw money you've contributed at any time for any reason without penalty. You can't touch earnings, but you can touch contributions. So no worries about "over saving" in a Roth IRA.

What is your retirement plan? Are you aiming for early retirement prior to 59.5 years old? That would help determine where you want to be saving. You don't want a huge 401k that you have no access to when you need it if you retire at 55 or 52.

As long as you are covering all of your costs, maintaining an adequate EF, saving money in non-retirement accounts for short and medium term needs like travel, home and car repairs, car replacement, etc., then I think you're in great shape.

[skives]

If you continue 15% to the 401k and max the Roths, what overall % of income will you be saving? And what non-retirement saving are you doing?

The great thing about the Roth IRA is that if absolutely necessary, you can always withdraw money you've contributed at any time for any reason without penalty. You can't touch earnings, but you can touch contributions. So no worries about "over saving" in a Roth IRA.

What is your retirement plan? Are you aiming for early retirement prior to 59.5 years old? That would help determine where you want to be saving. You don't want a huge 401k that you have no access to when you need it if you retire at 55 or 52.

As long as you are covering all of your costs, maintaining an adequate EF, saving money in non-retirement accounts for short and medium term needs like travel, home and car repairs, car replacement, etc., then I think you're in great shape.

If we continue 15% to Roth 401k and max Roth IRAs we would be saving 32% of our gross income.

Aiming for retirement at 60 but never know might just work part time at that point.

We have a $15k EF.

[kork13]

This is a very wise question. I've struggled with getting a good answer for myself many times, and have settled into some middle ground -- remember, with finances, it doesn't have to be all or nothing!

As a time of thumb, 10-15% of gross income toward retirement is generally a pretty healthy amount, and personally I think going above 20% is generally inadvisable unless you're rapidly approaching (or past) 59.5 y/o. I don't want someone to save a ton in retirement, retire early, then be unable to touch most of it, even if you did Roth & can withdraw your contributions. If you want to save/invest more, I'd tell you to use taxable accounts that don't have all the strings attached. That will give you more flexibility to use the money however & whenever you might need it.

The other side of the question is balancing your future against your present lifestyle & enjoyment. This is hard to advise on without knowing alot of details, but generally I'd say to prioritize living a happy & fulfilling life. You definitely CAN save too much, and that line is crossed when you're saving adequately for the future, but saving an excess such that you begin to negatively impact or hold back living a fulfilling life today.

Confession: I've done this, and it wasn't good. I'm naturally a compulsive saver, and typically save/invest 40-45% of gross (though it's split between retirement & taxable accounts). But at one point I started drifting north of 50-55%, and my family wasn't doing the fun things that we enjoy like travel, camping, hobbies, entertainment, eating out, etc. I had to very intentionally start loosening the purse strings to incrementally get back to helping our family enjoy life while we live it. We're happier for it.

So my recommendations:
- Bump up retirement to no higher than 20% of gross, if you want to. But this is unnecessary, you're doing well there.
- If you want to save more of your free income, use taxable investments, to preserve flexibility.
- Don't try to save/invest so much money that you lose sight of investing your time, money, attention, and efforts into your family. Ensure that you're still having a fun & fulfilling life today.

[disneysteve]

If we continue 15% to Roth 401k and max Roth IRAs we would be saving 32% of our gross income.

Aiming for retirement at 60 but never know might just work part time at that point.

We have a $15k EF.

32% is fantastic. Is it too much? Again, if you are covering all of your needs and wants, there's certainly no limit. And if you are setting aside funds in an accessible place for unforeseen spending that pops up, keep at it.

You can never replace the value of time when it comes to your investments. If you can do 32% now for as long as that is comfortable and at some later point you need to cut that back some, you'll be way ahead in the long run thanks to compounding on that money.

Saving at that rate for as long as you can comfortably do it will also create much more flexibility down the road if you decide you'd like to retire or cut back or change to something less demanding prior to 60.

[Jluke]

For the Roth IRA:

if you dont have one already start one today for him and a separate one for her and put like $50 in for 2023 just to start.

the reason would be you start the clock on the 5-year rule. I think that still exists.

you can contribute to 2023 up until tax day April 2024 so direct contributions to 2023. And then after tax day move to 2024 contributions.

In general:
at your age there is a lot of life to live. Meaning anything can happen (good or bad). Save what you can now so it can grow. Be sure to enjoy vacations etc - whatever you do for fun.

don’t let the foot off the gas just cause you are debt free.

[bjl584]

It would probably be helpful to have a line item in your budget for fun.
Then we won't feel like you aren't meeting your saving/investing goals.

[ua_guy]

I think the answer is yes, someone can save too much.

I think it all depends on what your end goal is with retirement and the way you want to live life. This gets down to how you estimate expenses, and what you anticipate them to be. It's a really hard question to answer without knowing your "big picture".

On the other hand, if everything is accounted for and there's still extra money, it's not wrong to save, even if too much. Sometimes saving brings more joy than expanding lifestyle or spending frivolously.

[terri77]

Unless you’re not able to pay your bills, then no, I don’t believe you can save too much. But I’ve been maxing out my retirement accounts since 30. I plan to do so until I retire, taking advantage of the catch-up contributions when I turn 50 as well.

[LivingAlmostLarge]

Yes you can absolutely save too much. You should save to fit your goals (early retirement), leaving to family, etc. Then enjoy it. I don't know what that number is because it's different for every person. But big picture if you can hit your number at the age you want saving what you save then you should not feel the need to save more.

I have ramped down savings these past 2 years. It's been intentional. We save but aren't supercharging saving so we are still able to enjoy spending that is above what most people would be able to do at our income level. Part of it is that we have no bills. Our income is ours dispose of.

So we ave the max 2 401k, 2 roth ira, 2 esa, and debating 2 ibonds. It's about 25%. Is that a lot? I don't think so, but it suits us to do that and still meet our goals. Add in our mortgage principal payments of $20k/year and we're looking at 35% "savings" rate. Before probably closer to 60-70% of our income, but our income was large and our lifestyle was the same.

So if you are meeting your personal goals i don't think it's wrong. I used to worry about it but I stopped worrying about it recently. I know we are okay so scaling back now in prime saving years is fine.

[VanessaKruze]

Maxing out Roth IRAs is great, but make sure it doesn't cramp your lifestyle or prevent you from saving for short-term needs like a new vehicle or house upgrades.

[Vincent Smith]

First off, kudos on achieving a debt-free status and being proactive about your finances. It's an enviable position to be in!

When it comes to saving, finding the right balance is key. It's fantastic that you're contributing to Roth 401Ks and planning to max out Roth IRAs. These decisions set you up well for retirement. However, considering your desire to enjoy life now and plan for future expenses, it might be worth revisiting the allocation.

Given your responsible approach of not buying anything unless you have the cash, it seems like you've got a solid grip on your finances. Allocating some of that $25k to experiences, upgrades, or planned expenses could provide a nice balance between enjoying the present and securing your future.

It might be beneficial to reassess periodically, especially if your goals or priorities shift. Ultimately, it's about finding a financial strategy that aligns with your values and lifestyle.

[myrdale]

One other thought is if we are drawing a line between savings and investing. If you're "saving" all of your extra money, but not "investing" it, then yes you are saving too much.

[takekuma]

Hitting that debt-free status is a win. Putting away for the future is crucial, but gotta enjoy life too. Maybe find a balance, like split the extra cash between Roth IRAs and your fun fund?