5 Signs You’re Saving Too Much for Retirement

Key Points – 5 Signs You’re Saving Too Much for Retirement

Are You Saving Too Much for Retirement?
Why Stress Testing Your Financial Plan Is So Important
Eliminating Fear and Greed While Planning for Retirement
Remember That Time Is Your Greatest Asset
6-Minute Read

Are You Saving Too Much for Retirement?

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Did you know it’s possible to save too much for retirement? It can be hard for a lot of people to grasp that concept. The natural follow-up questions that someone might ask in response to that are, “How is it possible to save too much for retirement?” and “How am I supposed to know if I’m saving too much for retirement?”

Those are two very good questions that we’re going to do our best to thoroughly address. Here are five signs that you could be saving too much for retirement.

1. You Don’t Know Any Better

We’re not trying to be facetious with this first sign that you could be saving too much for retirement. The hard and simple truth with anything—retirement planning included—is that you don’t know what you don’t know.

How are you supposed to know if you have saved enough for retirement? That’s a question that a lot of people get hung up on. Your answer to that question is going to be different than the answers of your friends, neighbors, or colleagues.

Think about these following things and how they’re unique to you.

Personal goals (financial and nonfinancial)
Earnings history
Risk tolerance
Tax situation
Health
Legacy goals/family situation

We could go on and on with that list, but the takeaway is that you need to have a financial plan that’s tailored to your needs, wants, and wishes. We encourage people to begin the financial planning process at least 10 to 15 years before retirement so that they have clarity about whether they’ve saved enough for retirement. To learn more about considerations to keep top of mind while planning for retirement, download our Retirement Plan Checklist.

Retirement Plan Checklist

Are You Still Working Even Though You’ve Saved Enough for Retirement?

There have been many occasions where our advisors have met with people who haven’t started planning that far in advance. In some cases, people will need to adjust how they’re saving so they can hopefully meet their retirement goals. But in other cases, people have more than enough for retirement and can retire as soon as they’d like.

While it’s nice for our advisors to see the relief on people’s faces when that happens, what if they had started planning earlier? Think about the memories those people might have missed out on because they didn’t realize they had already saved enough for retirement. Instead, they worked longer than they needed to just because they didn’t have the clarity from a financial plan.

2. Fear

This leads us to another sign that you could be saving too much for retirement: fear. The fear of running out of money can make it incredibly difficult for people to have the confidence to retire. And that fear can stem from a multitude of sources—inflation, healthcare costs, tax rates, and economic conditions just to name a few examples. According to Pew Research Center, only 23% of Americans view U.S. economic conditions as excellent or good.₁ That’s compared to 36% who view U.S. economic conditions as poor.

Stress Testing Your Financial Plan

The fear that stems from the factors we just mentioned can grow larger and larger because they aren’t within your control. However, you can plan for all of them. The clarity from a financial plan that we mentioned earlier can be brought to the forefront via stress testing. When we build a financial plan, we stress test it against various past economic cycles to see how it would perform in times of high inflation, high healthcare costs, high tax rates, and other poor economic conditions.

Once we stress test your plan with our financial planning tool, it will give you a probability of success that forecasts your chances of getting to and through retirement without ever having to change your spending. For example, let’s say your plan has an 85% probability of success. That doesn’t mean that your plan has a 15% chance of failing. It means that there’s a 15% chance that you might need to temporarily alter your spending.

The fear of running out of money in retirement may cause people to develop a protective mindset. They’ll get so focused on saving for retirement and won’t give themselves permission to spend, even if they have a plan that gives them permission to do so.

3. Greed

For all the married folks out there, how often do you have conversations with your partner about money? Typically, one partner is much more comfortable with spending money than the other. While it’s important to spend within your means, the focus of this article has been on signs you could be saving too much for retirement.

Are you still saving for retirement when you already have enough? If so, that could be a sign of greed. What’s causing you to keep saving? Again, that’s why it’s critical to have a financial plan so that emotions such as fear and greed don’t dictate your retirement planning decisions.

4. Missing Work-Life Balance

Don’t forget that your largest financial asset (maybe your employer retirement plan or your home) won’t be your most valuable asset. Your most valuable asset is time. Our third sign that you’re saving too much for retirement is not having a good work-life balance.

According to MassMutual’s Retirement Happiness Study, 78% of retirees say they have more than they need or about what they need in retirement savings.₂ We want to commend those people for being diligent about saving for retirement, but that is worrisome if a majority of those people believe they saved more than necessary.

How Much of Your Identity Is Tied to Your Job?

Make sure that you don’t work longer than you need to just because you’re worried you won’t have enough to get to and through retirement. By doing that, you’re sacrificing valuable time that you could spend doing what you love with the people you love. Keep that in mind if you feel like your work-life balance is off because it could be a sign that you’re saving too much for retirement.

It is important to take your job seriously, but there’s a fine line with work-life balance. When you think about your identity, how much of it is tied to your job? Are you working so much that you’re missing out on precious memories with your friends and family? If you’ve accrued several weeks (or months) of PTO, take it. Spend that time doing the things that are most important to you.

As you’re planning for retirement, it’s also critical to have a mindset that you’re not just retiring from your job. Planning for retirement doesn’t just involve saving. What are you retiring to? If you can’t answer that, take some time to think about it. Believe it or not, boredom can quickly consume someone’s retirement. That can be a sign that you saved too much for retirement, but by the time you’ve realized that, it’s too late.

Have You Been Putting Off Your Dreams?

We also want to be clear that this message isn’t just for people who are close to retirement. Let’s say that you’re 50 but aren’t planning to retire until 65. Are you putting off something like a family vacation because you’re concerned about having enough for retirement?

That’s why you need to build a financial plan that prioritizes things like family vacations and other objectives that are important to you. Make sure that you have a plan in place so that you’re not saving too much for retirement.

5. Improper Asset Allocation, Tax Allocation, or Asset Location

It’s crucial to have discipline when it comes to saving for retirement, but that’s only one piece of the puzzle. You also need to have a good understanding of your sources of retirement income and where your money is being saved. Remember that your ideal asset allocation, tax allocation, and asset location all need to be unique to you. Determine them based upon your needs, wants, and wishes rather than using the asset allocation, tax allocation, or asset location that worked for your friend.

There is so much more from a financial planning perspective beyond asset allocation, tax allocation, and asset location that impact retirement savings. However, we need to know more about your situation first before we can determine what planning strategies to implement within your plan.

Three other signs that some of our financial planners have seen from people who have been saving too much for retirement have included:

Having a Required Minimum Distribution amount that’s more than you’re going to spend.
Social Security serving as a bonus source of income.
Taxes being higher in retirement than they were while you were working.

Do You Think You Might Be Saving Too Much for Retirement?

Did any of the signs that people could be saving too much for retirement hit home for you? Let’s address them now by building a financial plan that can help give you confidence to make informed decisions with your money, freedom from financial stress, and time to spend doing the things you love.

It’s not too early or too late to start building your personalized financial plan. Start a conversation with our team below so we can do our part to keep you from saving too much for retirement.

See Our Schedule

5 Signs You’re Saving Too Much for Retirement : Watch Guide

00:00 – Introduction
01:34 – You Don’t Know Any Better
05:52 – Fear
09:07 – Greed
12:05 – Improper Asset or Tax Allocation
13:38 – Missing Work/Life Balance or Putting Off Your Dreams
16:20 – BONUS: Leaving an Unplanned Legacy

Resources Mentioned in This Article

Past Episodes of America’s Wealth Management Show

Downloads

Retirement Plan Checklist

Other Sources

[1] https://www.pewresearch.org/politics/2024/05/23/views-of-the-nations-economy-may-2024/

[2] https://www.massmutual.com/about-us/news-and-press-releases/press-releases/2024/03/massmutual-research-most-retirees-are-happier-in-retirement

Investment advisory services offered through Modern Wealth Management, LLC, a Registered Investment Adviser.

The views expressed represent the opinion of Modern Wealth Management a Registered Investment Adviser. Information provided is for illustrative purposes only and does not constitute investment, tax, or legal advice. Modern Wealth Management does not accept any liability for the use of the information discussed. Consult with a qualified financial, legal, or tax professional prior to taking any action.