Is there ever too much saving for retirement?

Stephanie2167

This may seem like a dumb question. I'm 33 and have been with the same company 11 years. I started saving for retirement when I was hired and have been saving 15% since then. I was doing some research on the good ol internet at how much people should have saved by a certain age. At 33 I have 3.6x my salary in my retirement account. I'm very happy with this but we're also currently raising 3 little girls and sometimes money can be tight at the end of the month. Do I even think about lowering the amount I contribute for a little bit to help with monthly expenses right now, or is that just asking for trouble? I just fear I'll never be able to get it back up to 15% if I lower it down?

LillibetteV

I don't think you can ever really save too much (unless you save to the point that you don't enjoy your life), but perhaps you could save some of that into a more accessible investment account to give yourself options. It would also depend (for me) what expenses you're trying to cover and if you've exhausted all other options for trimming costs. 

KAdams767

It depends on a lot of other factors, IMO.  My opinion would be dependent on how much 3.6x my salary is in dollar value, how long I plan to work until retirement, how much my partner makes and where they are in terms of retirement saving, etc.  Are you saving elsewhere outside of retirement? 

From a personal perspective, I would not cut back under 15% unless it was absolutely necessary.

labro

I'm of the same opinion as @LillibetteV. I don't think there's a point where it's "too much". We don't have any kids right now which enables DH and I to contribute the max amounts to our retirement accounts and it's going to be hard to maintain with kids but we plan to make a go at it....because like you, I know if we scale back it's going to be tough to go back to the same levels as before.

Do you have an emergency fund? What are your future education plans for your girls?

I'd only consider scaling back in order to fund a stronger e-fund or to start contributing towards college expenses for my kids if I wasn't doing so already. One of my biggest worries about our retirement is affording healthcare. I'd rather have "too  much" than not enough. Retirement is many many years away for us and there's no way to predict what healthcare affordability is going to be like in 30 years. So we're doing what we can to save now.

jtmh2012

I would argue that unless you're independently wealthy, there's no such thing as too much.  That said, most of us have a point where contributing further would severely impact their lifestyle and ability to pay bills.  Like there's no way we could contribute the $18k/each that our 401ks would allow without a major lifestyle reduction, but we do make sure to get the company match.

LillibetteV

@labro makes an excellent point about the emergency fund, but I have to respectfully disagree about scaling back retirement to save for college. The girls can get loans for school, but you can't get a loan to retire. 

labro

LillibetteV said:

@labro makes an excellent point about the emergency fund, but I have to respectfully disagree about scaling back retirement to save for college. The girls can get loans for school, but you can't get a loan to retire. 

Hopefully in the next 10 to 20 years they start making real changes about the cost of college in our country so loans and parent contributions aren't such a significant factor.

jtmh2012

LillibetteV said:

@labro makes an excellent point about the emergency fund, but I have to respectfully disagree about scaling back retirement to save for college. The girls can get loans for school, but you can't get a loan to retire. 

The biggest issue to me to scaling back on retirement contributions is your biggest ally and biggest enemy is time.  By not contributing, you lose the compounding that would have occurred and it takes a lot to make that up later.

I think my first priority would be to identify why money is tight at the end of the month.  Is it something that is temporary and can be dealt with or is it a permanent condition?  If it's the later, then you might have to fall back on the contributions out of necessity.

LillibetteV

labro said:

LillibetteV said:

@labro makes an excellent point about the emergency fund, but I have to respectfully disagree about scaling back retirement to save for college. The girls can get loans for school, but you can't get a loan to retire. 

Hopefully in the next 10 to 20 years they start making real changes about the cost of college in our country so loans and parent contributions aren't such a significant factor.

Here here to that! Although DH and I have already decided that we're shipping the kiddos up to Canada to go to their dad's alma mater. We both went to universities with similar international ratings and name recognition except he paid $15k a year (international student rate) and my parents paid $50k. 

hoffse

It depends on what you want to do.  If you are talking about just tax-advantaged accounts, I think maxing them out is plenty, but it won't make you whoa wealthy.

Many people have an $18K/year limit for a 401(k), a $5500/year limit for their IRA, and then a $3400/year limit for their HSA (2017). 

If a married couple maxed these accounts out and never spent any of it early (ie: from the HSA), they would be saving $53,800 per year in tax-advantaged accounts.  That's obviously plenty for an extremely comfortable retirement, but it won't make you super legacy rich.  You should have several million in retirement if this is all you ever do.

The super savers - who are a very small minority of the population by the way - save a lot more than this per year, by dramatically lowering their standard of living and leveraging taxable accounts too.  I do think some of these people go a little overboard with it.  

It all depends on your current income, future income, and standard of living you want to see in retirement.  There are partners in my firm who make over a million per year in gross income.  Do they need to save 15% to maintain their lifestyle in retirement?  Maybe, but probably not, especially if they use current income to pay cash for the second home, boat(s), and other toys.  But those of us still working to hit the contribution ceilings of our tax-advantaged accounts (which is most of us), probably need to keep the grind going.

I personally think retirement needs to come before saving for college or enrolling your kid in their third extra curricular activity.   I think the best thing you can do for your kids (financially) is not be a burden on them in retirement.  My H and I have seen this first-hand.  We have one set of parents who are going to be perfectly fine (mine).  We have another set that we are worried about (his).  His parents probably made 2-3x what my parents made their entire careers.  The fact that they have minimal retirement savings is appalling.  What makes it worse is they are accustomed to spending most of their money on a really high standard of living - they are into the whole .  It's going to be a shock if they ever try to retire or find that they can't work due to age/infirmity.

Stephanie2167

This is all great you guys. Thank you! Yes, I need to make changes on our spending and that is my main plan in 2017. My company match .75 on the dollar up to the first 8%. We do have an eFund that is 5 months of living expenses. My husband contributes to his TSP (military probably just 5%). Daycare alone runs us $2000 a month. Two and a half more years until my twins start Kinder (counting down the days).

csuave

Lots of good discussion here. 
I'm in really good shape with my retirement savings but a retirement calculator will still tell me I'm short of where I need to be in order to retire by 55 (my current goal). 
But even if it told me I was right on I would continue at my current rate (or more when extra income allows) because:
1. I'm not depriving myself of anything currently
2. There are too many unknowns for the future; I would rather have a larger retirement cushion
3. If I end up exceeding my goals I could always retire even earlier or just enjoy living a more lavish lifestyle.  Those are "problems" I wouldn't mind having!

LillibetteV

Stephanie2167 said:

This is all great you guys. Thank you! Yes, I need to make changes on our spending and that is my main plan in 2017. My company match .75 on the dollar up to the first 8%. We do have an eFund that is 5 months of living expenses. My husband contributes to his TSP (military probably just 5%). Daycare alone runs us $2000 a month. Two and a half more years until my twins start Kinder (counting down the days).

That is the one expense I am not looking forward to next year. Woof. 

Stephanie2167

LillibetteV said:

Stephanie2167 said:

This is all great you guys. Thank you! Yes, I need to make changes on our spending and that is my main plan in 2017. My company match .75 on the dollar up to the first 8%. We do have an eFund that is 5 months of living expenses. My husband contributes to his TSP (military probably just 5%). Daycare alone runs us $2000 a month. Two and a half more years until my twins start Kinder (counting down the days).

That is the one expense I am not looking forward to next year. Woof. 

It was the having twins part that was brutal. Two infants in daycare used to run us $470 a week + a preschooler. About $640 a week. Barf. We joke "what did we do with that money before we had kids?"

LillibetteV

Stephanie2167 said:

LillibetteV said:

Stephanie2167 said:

This is all great you guys. Thank you! Yes, I need to make changes on our spending and that is my main plan in 2017. My company match .75 on the dollar up to the first 8%. We do have an eFund that is 5 months of living expenses. My husband contributes to his TSP (military probably just 5%). Daycare alone runs us $2000 a month. Two and a half more years until my twins start Kinder (counting down the days).

That is the one expense I am not looking forward to next year. Woof. 

It was the having twins part that was brutal. Two infants in daycare used to run us $470 a week + a preschooler. About $640 a week. Barf. We joke "what did we do with that money before we had kids?"

We're going to look into a few different options, but the daycare my niece goes to down the street from us will run us $380 for four days/week or $390 for five days for just one kid. I'm going to check a couple other in town to see if there are as good but cheaper, but my understanding from other friends is that's pretty standard in our area. And yet childcare workers only make $30k a year even up here. It's ridiculous. 

Stephanie2167

LillibetteV said:

Stephanie2167 said:

LillibetteV said:

Stephanie2167 said:

This is all great you guys. Thank you! Yes, I need to make changes on our spending and that is my main plan in 2017. My company match .75 on the dollar up to the first 8%. We do have an eFund that is 5 months of living expenses. My husband contributes to his TSP (military probably just 5%). Daycare alone runs us $2000 a month. Two and a half more years until my twins start Kinder (counting down the days).

That is the one expense I am not looking forward to next year. Woof. 

It was the having twins part that was brutal. Two infants in daycare used to run us $470 a week + a preschooler. About $640 a week. Barf. We joke "what did we do with that money before we had kids?"

We're going to look into a few different options, but the daycare my niece goes to down the street from us will run us $380 for four days/week or $390 for five days for just one kid. I'm going to check a couple other in town to see if there are as good but cheaper, but my understanding from other friends is that's pretty standard in our area. And yet childcare workers only make $30k a year even up here. It's ridiculous. 

Where are you at? I'm in Philly.

LillibetteV

@Stephanie2167 Boston. It's just expensive all around in our cities! 

vlagrl35

My thought is if you have struggling just to get by and it may just be a temporary situation I would say go down a little bit in retirement just for the time being.  I also agree about college tuition.  we don't have the cash to save for DD's college because we would rather retire than be a burden to her as we age because we didn't save.

short+sassy

jtmh2012 said:

LillibetteV said:

@labro makes an excellent point about the emergency fund, but I have to respectfully disagree about scaling back retirement to save for college. The girls can get loans for school, but you can't get a loan to retire. 

The biggest issue to me to scaling back on retirement contributions is your biggest ally and biggest enemy is time.  By not contributing, you lose the compounding that would have occurred and it takes a lot to make that up later.

I think my first priority would be to identify why money is tight at the end of the month.  Is it something that is temporary and can be dealt with or is it a permanent condition?  If it's the later, then you might have to fall back on the contributions out of necessity.

To me, this is the biggest factor.  Especially since you all are fairly young.  It's not so much the $X you're not putting into retirement now, it's the lost compounding.

But if you all are comfortable with your expenses, can't or don't choose to cut them more, and are still falling short each month, then something has to give.

Retirement savings is a big priority.  However, I'd consider cutting back on it until your twins are out of daycare.  Then, once you have that large bill cut down or gone, revisit amping the retirement back up.  Just be very mindful of what you are doing and have a plan.  Like, "Cutting retirement contribution by $200/month until Sept. 2018.  Review at that time, add at least $200/month back to retirement contributions."

Or, you can always try a semi-step.  Put the same away each month for retirement savings, but funnel a portion you are comfortable with into something more accessible than an IRA (or similar retirement vehicle).  Like mutual funds.

bmo88

I think it's all relative depending on your situation. We are 28 and 30, no kids and little debt. We save about $35,000 a year in retirement. But we plan to bump that up to $40,000 next year. For us, it doesn't effect our budget much because we have banked all raises in savings and retirement for the past 4 years. So our cost of living has stayed the same despite doubling our salaries. 

When we have children, we may reassess. We prefer balance where we can enjoy life now while traveling, eating out occasionally and having hobbies. We want to save for a good retirement but don't want to be miserable now.