Is It Possible to Save Too Much Money?

rogernusbaum

That question was the underpinning for an article from Marketwatch about a couple who are each 57 and have mid-seven figures accumulated after years of saving 25-30% of their incomes. What prompted them to ask the question about too much was outside criticism that they had sacrificed too much over the years in service of a future that is never guaranteed. This is a valid point. There is cliche that life is about the journey, not the destination and so if these folks look back and conclude that they didn't do much living (this point wasn't specifically addressed) then sure, they saved too much.

Also implied but not specified is that their accumulated savings is more than the amount they need for their lifestyle. What does that mean? In hopes that you reading this have the lifestyle you want, how much does it cost per month? For the lifestyle my wife and I have (and want), winning the Publisher's Clearinghouse Sweepstakes (we've never entered) would result in either very conspicuous and wasteful consumption or the money would accumulate in our checking account, I think the winner gets $5000/wk for life. So, at close to 60 years old, like the people in the article, if you're cruising along happily with a $75,000/yr lifestyle and know that when the time comes your $5 million rollover IRA is going to kickout a $200,000 RMD to start and you'd also have Social Security then that's more than you actually need for your preferred lifestyle. (technical note: the RMD would actually be a hair under $200k)

This is not a true problem per se but feelings of regret or time wasted are certainly not positive. Also, this scenario would owe a lot in taxes and yes it would be affordable it is still money they the couple doesn't benefit from.

The point here is one of balance. Not spending, investing really, in something that would make your life easier because you have to keep saving (the presumption being you've been a strong saver all along) is a negative tradeoff. Certainly some things are unnecessary even if they would offer a form of enhancement. An example that I hope makes the point, my wife and I each drive old cars. I have a 2006 Tundra and my wife has a 2003 4Runner. Properly maintained, Toyotas can last a very long time. We haven't had a car payment in more than 10 years. A new car with more features would be an improvement but not an important life enhancement. This year we are investing in a generator, I've mentioned this a couple of times. We bought a Goal Zero that has come in handy for two brief outages that happened recently but it is not a whole house solution. We've investigated a few things and are leaning to a solar powered back up system (probably the wrong jargon) where a few panels charge up an array of batteries that we can switch to when the power goes out.

This would be a legit enhancement. Just a couple of winters ago, we lost power for a week. There was a massive snow storm, we got 30 inches in a couple of days, and something broke on the back side of a mountain and because of the snow depth they couldn't easily get to what needed fixing.

A couple of the topics I see a lot of on Twitter are on self-improvement and what I call deep thinkers and an area of overlap between the two is an idea we've been exploring here since my start in blogging which is to think about what the future you might want or need. A lot of the folks engaged in these topics and coming up with these ideas (obviously I had no claim of originality 15 years ago, it's mostly common sense even if difficult to achieve) seem to be younger than me, I'm 54.

If you made good financial decisions when you were younger like having a high savings rate, living below your means, driving your cars for a long time then the future is now. This is the time for what used to be the future you, now just you, to benefit from the decisions you made when you were younger.

The 57 year old couple in the Marketwatch article doesn't really need to save any more money. They should feel free to invest in whatever the equivalent of their solar powered back up system is. And of course, who cares what I think about cars, that's my thing, if they need new cars, they probably don't need to hesitate.

The 57 year olds have won, so to speak. Our fifties is an interesting decade. People can be elite athletes able to hold their own against younger competitors or unfortunately be very "old" having to take a lot of medications and having serious limits on what they can do. You could say the same about 60's and 70's too of course but fewer in their 60's will be elite compared to 50's.

‚ÄčThere was no mention of the 57 year old couple's health but if they are that age, have a huge nest egg and are at least moderately fit then in terms I use regularly here, they have optionality to do whatever they want. A lot of optionality.

We can't control the outputs but we can control the inputs. Live below your means and stay fit.