5 Signals You are SAVING TOO MUCH for Retirement

Saving for retirement is job #1 for most people. You can never have too much money when you leave the workforce, yet putting money away for retirement seems to elude many people - but not everyone. There are a small percentage of people out there who take it to the other extreme. This video discusses who they are and if you are one of them.

Overview
After I graduated from business school, I went to see a financial advisor, and what I said to him was I want to put everything I have, every spare dollar into some form of a retirement account. And the best advice that anyone could get was given to me that day. This gentleman said, "Life is long, and you need to save as if you're walking a marathon, not running a sprint." Those words have stuck to me until this day and when I think about those words, I see a variety of different people that are obsessed with saving for retirement to their own detriment.

Let's get into it, but before we do, please make sure you click subscribe notifications so that you get alerted the next time I post a video. I post about twice a week. I have a question for you, when you think about retirement, are you thinking about escaping or transitioning? Escaping means that you're going to go full Marlon Brando and exit stage right. Transitioning means that you're going to continue to dabble in the moneymaking arena, whether it's through a part time job, a hobby that generates income, consulting, et cetera.

As you would expect, escaping means that you need to save more for retirement than transitioning. In fact, if you plan on generating $10,000 per year in part time income, the absence of that part time income means that you need to save approximately $250,000 more in your retirement accounts assuming that you spend approximately 4% per year using the 4% rule. We need this as part of the frame, but this isn't the big frame, this is just a data point. Once you know the answer to this question, everything I'm going to talk to you about next will make a lot more sense.

Signal number one is that you actually blow through your contribution limits. From time to time, you'll hear about people that over contribute to their retirement savings, their 401k, their IRA, et cetera. If you don't catch it, all sorts of bad things happen and depending on the type of retirement vehicle you use, the penalties differ, but a very common one is the 6% penalty. First, if you don't catch it, you will owe 6% per year on your excess contributions. This means that if you have a 10% return, it now becomes a 4% return. Now I don't have to tell you that there are much better places to put your money, even if you don't have the tax advantages if 60% of your returns are going to be taken away from you.

Signal number two is that you're missing other money goals, other money targets. You're not continuing your education, which would result in higher income. You're not paying off your mortgage, which would result in a safer retirement. You're not paying off your credit card, which is very bad altogether because you're paying somebody else 20%. This is, as they say, penny wise and pound foolish. It happens more often than you would think. People become caught up in getting every dollar into a savings vehicle without understanding the better use of that money.

Point number three is that it's causing health issues, mental or physical health issues. This point reminds me of the 1984 film A Christmas Carol, starring George C. Scott. George plays Ebeneezer Scrooge,...
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Disclaimer: this video is for educational and entertainment purposes only and is not meant to be a substitute for legal, accounting, tax, or professional advice. If you have any specific questions about any legal, accounting, tax or other professional service matter you should consult the appropriate professional services provider.

[robles]

A real eye opener. I noticed most people tend to get obsessed with money to the point, that's all they think about.
Excellent info. 👍

[Rugrats]

I’m 57 today and my goal is to do a lot of traveling till I physically can’t do it no more then live a more sedative life. My goal is to retire or pre-retire by 62’and have a net worth over 1.5mil with no debt like I have no debt right now and have a net worth of 1.1mil now.

[sct]

I saved some, spent some, but wish I traveled more. I should have gone overeas, now with Covid-19, we can't. That's my biggest regret.

[jojowhite]

I retired at the end of last March right after my 62nd birthday. In retirement my income is almost 75% of my working income and this is without withdrawing from my TSP account. I've noticed that it seems like I have more money available than I did when I was working. I started thinking about the charges that are no longer taken out of my retirement income. I no longer save 10% into my TSP account. I no longer have social security and Medicare taxes taken out. No more state taxes and I also had taxes taken out for two city locals. It's funny that I never thought about these working expenditures before I retired.

[liveslisa]

I went full-on Brando and retired at 60. I love retirement and I am happy that I am not being cattle-prodded anymore in a corporate job. And between my retirement benefits and investments, I have enough money and sleep very well at night. A little retirement planning can go a long way.

[toddbenfield]

I seem obsessed with saving, and that gives me pleasure some how! I live modestly, and do spend on toys though 👍but seem to get more satisfaction on saving, building wealth ! Am I normal🧐

[mikemc]

Geoff, great video but I can’t access your retirement ready worksheet on your website. Ideas?

[ThatGuy-murr]

When I retire, I am; “ going Galt “.

[dansouth]

This is mostly nonsense. Like having too much cash (whether in the bank or physical) is a real problem. Yes, you have to live and enjoy your time on earth, but most people have a way more problematic time spending too much money on crap they don't need and/or not investing for their future.

[OroborusFMA]

Asset forfeiture laws turn the traditional presumption of innocence on its head. In effect the police can seize anything you own and you are burdened with "proving" it was not the result of illegal activity. Which is next to impossible.

[gvvmhh]

Saving too much? I really hope a lot of people don’t see this crap.
Young people need to hear the opposite. The people that save too much are sick it’s not normal people doing this. So let’s not send the wrong message

[ttudidfitrhondavigil]

We live in a country with a ridiculously low savings rate.

[kelly]

My husband an I we’re retired at 56 we don’t have kids but for the past 11 yrs we enjoyed our lives we travelled to different countries around 45 and at the same time savings for our future. Let me tell you everytime we had a tour we met retired people that were in there 70’s to 80’s but mostly have there own health issues and it’s no fun for them they have hard time walking some end up in hospital coz of too much being outside you can have all the money by saving & wait for retirement to enjoy life but your knees can no longer handle walking that’s no fun at all. I can only say enjoy life while you’re still younger because life is too short we can’t go back on time and change so enjoy and at the same time save for your future if you can. 😀

[bramor]

Its an interesting video, but i am inclined to disagree. Currently i save around 70% of my income towards various investment accounts. Why save this much? 1. It gets me comfortable living on a relatively small amount of money. 2. The idea of financial freedom by 35 is something dreams are made of. 3. Its fun to watch my investments grow. 4. Its covid world anyway, WTF am i going to spend my money on?

This way when the world unlocks in a few years, i will have work as a choice rather than an obligation, AND i can spend every last dime of my income (if i chose to continue working) and live like an absolute rock star while my investments keep growing.

[johnfetter]

You can't miss what you never had. Pay off debt, save at least as much as you pay in taxes each year, and then live your life. Retirement will be easy. Retirement 4 years ago. Never looked back.

[jeffreyvandervoort]

When I first got with a financial advisor about 2 years prior to my 2018 retirement, he told me that the biggest problem would be spending after a lifetime of saving and living very simply. I have no idea how he knew but his prediction was correct.

[kidglove]

My dad spent everything leaving my mom broke but we lived life. My uncle saved every penny had millions but died without any life. Find the middle ground

[skunkbudzrus]

Saving to much lol We were saving ever dam penny over the last 10 years around 65%-70% of our income. Invested and now retired at 40.We do have Roth for after 60 and 401k but from 40-60 we plan on traveling as much as we can as our boys are grown up. We lived with the bare necessities over those years in order for this to happen. Calculating and as long as the market can now return 5% a year for us adjusting 3% avg inflation we can safely withdraw 10k monthly over the next 20 years which we haven't even cam close to needing. Our spending usually around 3000-4000 depending on the trip and food expenses. Be happy while you can. My father made it to 59 was ready to retire and died 3 weeks before his last day.

[nhtmhhj]

I make quite a bit of money and some people pay me in cash. I had gotten into a routine of just putting it in a box. The same box I keep my passport and a gun in. I came home one day. My wife had the box on the coffee table. She just looked at me and said "What do you really do for a living. there's over a hundred thousand dollars in this box with a gun and your passport. Who are you" That was an interesting discussion.

[pizzame]

As a lower income worker and saver my goal is to escape. The minute I have what I need I am out. I have so many coworkers and relatives who died well before getting to retirement.