Here’s an interesting contrarian point of view, and one with which financial planners will surely disagree: You may be saving too much for retirement.
According to the Department of Labor [survey results here], as age increases, spending decreases in all categories other than health care.
However, the facts won’t get in the way of financial planners’ advice:
Bob Veres, who runs a newsletter and forum for financial planners, thinks most advisers will stick to the way they’re currently projecting retirement needs. The consequences of being wrong—of advising an earlier retirement or a more aggressive withdrawal rate—are simply too great.
The MSN article points out two “holes” in the revised spending theory: The data doesn’t include long term care expenses and well-off retirees spend more in early retirement as they travel around the world.
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Do retirees spend less than could spend, or do they spend less as that is all they have available?
With the rising cost of healthcare (a cliche if I’ve ever heard one), retirees will need more than there last salary even if they cut their lifestyle. Not to mention items like leisure travel, grandchildren expenses, and philanthropy.
What lies ahead in each of our financial futures is unknown. That’s a pretty big risk to our financial well being later. To suggest that we could be over-planning for this risk and be saving too much seems ridiculous. The fact of the matter is that a majority of people in this country are under-planning to an extreme. Those of us that are actually putting effort in to mitigating the risk of the unknown are just going to be better off. Besides. You can never have too much money. Worst case scenario: You’ll just have more money making money for you.
Hazzard
http://elym.blogspot.com
It’s great to allow your money to continue to grow while you’re growing old, but if you can’t use that money, there’s no point in growing it. Yes, you can pass it down to the next generation but not without substantial taxation. You might as well use the money when you’re alive.
But the future is uncertain and I agree; it’s much better to be safe than sorry, to use yet another cliché.
I prefer to save as much as I can for retirement. About half of it goes into tax-sheltered accounts, and the other half into taxable accounts.
The worst that could happen is that I will have to retire early. Ohh well.
This is an interesting point. I find that most people who have lived a full and productive life and have owned all of the usual stuff don’t really want to start purchasing and doing a whole bunch of new things on a regular basis.
As you get older you naturally lose some of that youthful energy. Although you might travel more, you’ll probably do so only a few times per year.
As well, when you’re older, all of your assets should be paid off. You should have paid for all of your household items. Seniors probably don’t really need to purchase that much.
It is important to save for retirement. I’d be interested to read more about what seniors are saying about how they spend their money after they retire.
Financial Maturity Blog