Maybe. How do you know? If you have not developed a detailed plan that looks at all the critical factors – projected expenses, years until retirement, current savings/investments, projected return on investments, projected sources of passive income, current savings rate, and withdrawal rate – it’s possible. In fact, if you have not developed a detailed plan there is almost no chance you are saving the right amount; you are saving too little or too much.
Is it possible to save too much? Of course. We’re all familiar with the idea of finding balance. Ideally, you are currently living life to the fullest and have an adequate plan in place to ensure your future is financially secure. If you are saving more than you need in that future, you are not spending money today that could be spent on activities that bring you pleasure.
One of the things I discuss ad nauseam with my wife and some friends is the idea of finding financial balance; that sweet spot between living for today and preparing for tomorrow. Over the years, as a result of these conversations and thoughtful reassessments, I have made adjustments to the amount of planned retirement income and hence, the money we are currently saving/investing, to reach our goal.
In Many Paths Lead to Financial Freedom, I noted that my wife and I are fortunate in that when we retire at age 60, I project we won’t even need the money in our retirement accounts. We should be positioned to live a very comfortable life on three employment pensions, the one we’re currently receiving and the two we’ll receive from our current employers at 60. And it gets even better at age 65, when we plan to start drawing our Social Security pensions.
Does that mean we will stop making contributions to our defined contribution plans? No. However, we are aware that we are in a position where we can contribute less, perhaps spend more on activities today or provide financial assistance to family members if necessary, without impacting our financial future.
Considering that detailed plan I mentioned earlier, I noted your projected expenses is one factor. If you structure your plan so that you go into retirement mortgage free and without credit card debt, it’s possible that you could live quite comfortably on a modest level of income.
When I consider how much I might need in retirement, I don’t need to look very far to get an idea. Even though my mother has a mortgage – her and my father, who passed last year, relocated to Arizona a few years ago and purchased a new home – she lives quite comfortably, travels fairly frequently and is engaged in numerous local activities in the community. In the seven years since she retired, her lifestyle has remained the same as her Social Security pension, a pension from a previous employer, and some savings have proven quite adequate.
Develop and manage your plan wisely; and strike the balance that will allow you to live life today and enjoy it in retirement. Stay savvy, my friends.