saving too much?

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northtexan
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saving too much?

Post by northtexan » Fri Mar 22, 2019 10:17 am

I will be graduating in a little over a year, my fiancé and I will hopefully be making lows 6 digits and currently have a plan for aggressive savings and investing for 10-15 years and then hopefully retire. Our goal would be to save about 1/2 of our take home pay in tax deferred and a taxable account to retire on until we are 65.

Has anyone ran in to saving too much and regretting it later on in life?

bloom2708
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Re: saving too much?

Post by bloom2708 » Fri Mar 22, 2019 10:21 am

Think of it as "deferred spending". Maybe at 40, 50 or 60. Your future self thanks you.

There are many forks in the road ahead. Adjust on the fly. Kids, houses, job moves. Life zigs and you zag.

Pre-tax 401k, Roth IRAs. HSA. Taxable if you get there. ESPP is also in the mix. Don't forget to live a little.

"Deferred spending" gives you a lot of options. Spouse stays home when you have a kid? Make less? Live in a lower cost area?
"We are here to provoke thoughtfulness, not agree with you." Unknown Boglehead

j0nnyg1984
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Re: saving too much?

Post by j0nnyg1984 » Fri Mar 22, 2019 11:09 am

I think you’d be sacrificing too much to save that amount solely in retirement accounts.

My situation is a little different since I’m single, but I make ~110k and max out my t401k, rIRA, and HSA. I’m also aggressively paying off my house. I don’t feel the need to invest additional funds at this time.

You should definitely max out both IRA’s and HSA’s, and contribute as much as possible to the 401k’s available. 30-40 years of that will see you sitting pretty come retirement time.

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smarcus3
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Re: saving too much?

Post by smarcus3 » Fri Mar 22, 2019 11:18 am

At that savings rate you'll be able to retire in 17 years if you're starting with nothing. If you're enjoying your current lifestyle keep it up.
This is my personal opinion. I'm an engineer not a financial advisor.

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Wiggums
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Re: saving too much?

Post by Wiggums » Fri Mar 22, 2019 11:19 am

I think you would be saving a bit too much, but this goal would likely change should you buy a house or add kids to the equation.

I would not save less if you are happy right now. Too much is better than not having enough and hating your job. Worse yet, losing your job and not having enough money to retire. Just remember, if you want to retire early, you need to think about the impact on SS, medical and possibly life insurance costs.
Last edited by Wiggums on Fri Mar 22, 2019 11:26 am, edited 3 times in total.

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smarcus3
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Re: saving too much?

Post by smarcus3 » Fri Mar 22, 2019 11:22 am

Wiggums wrote:
Fri Mar 22, 2019 11:19 am
I think you would be saving a bit too much, but this goal would likely change should you buy a house or add kids to the equation.
+1 to this. I currently save 55% but I know that will change once kids come along
This is my personal opinion. I'm an engineer not a financial advisor.

sjt
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Re: saving too much?

Post by sjt » Fri Mar 22, 2019 11:23 am

If you can do it, then yes, I would recommend it. It's better to be ahead than behind. A few years of this, reevaluate if you're on track (or ahead) to hit your financial goals and if so, loosen up the savings a bit.
"The one who covets is the poorer man, | For he would have that which he never can; | But he who doesn't have and doesn't crave | Is rich, though you may hold him but a knave." - Wife of Bath tale

Topic Author
northtexan
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Re: saving too much?

Post by northtexan » Fri Mar 22, 2019 11:25 am

j0nnyg1984 wrote:
Fri Mar 22, 2019 11:09 am
I think you’d be sacrificing too much to save that amount solely in retirement accounts.

My situation is a little different since I’m single, but I make ~110k and max out my t401k, rIRA, and HSA. I’m also aggressively paying off my house. I don’t feel the need to invest additional funds at this time.

You should definitely max out both IRA’s and HSA’s, and contribute as much as possible to the 401k’s available. 30-40 years of that will see you sitting pretty come retirement time.
Lately I have done some math and calculation with different amount and things, if we were to max out 401k and traditional/Roth IRA it would be about 50k including a company match and then 25k to a taxable. With my current assets after 15 years the tax deferred accounts would be around 1.1M and at 65 years old around 6M (with a 7% annual return). The taxable account would be around 1.2M, and would have to last about 25 years, that is what we are concerned about, but if we have extra money after expenses it would go into the taxable account. If I can make it to 65 on 1.2-1.7M, when I am 65 the real retirement would happen and could enjoy life a little more. I am not really interested in working for 30-40 years unless I can make one of my hobbies in to a income stream (most likely woodworking). If I can live off of that I feel we could easily make it with the taxable account until 65.

jwright19
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Re: saving too much?

Post by jwright19 » Fri Mar 22, 2019 11:35 am

I don't want to derail but I am curious: on the advice to aggressively contribute to Roth IRA and 401k, and get to taxable if possible. Assuming OP is fresh out of college and is FIREing, wouldn't that tie up their savings and leave them without anything until accessible without penalty (assuming they don't make it to taxable)?

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Vulcan
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Re: saving too much?

Post by Vulcan » Fri Mar 22, 2019 11:39 am

jwright19 wrote:
Fri Mar 22, 2019 11:35 am
I don't want to derail but I am curious: on the advice to aggressively contribute to Roth IRA and 401k, and get to taxable if possible. Assuming OP is fresh out of college and is FIREing, wouldn't that tie up their savings and leave them without anything until accessible without penalty (assuming they don't make it to taxable)?
"One way an investor can tap a traditional IRA before the age of 59 1/2 without triggering the 10% early withdrawal penalty tax is to initiate a program of Substantially Equal Periodic Payments (SEPP)."
https://www.bogleheads.org/wiki/Substan ... c_payments

Roth *contributions* can also be withdrawn at any time with no tax or penalty.
If you torture the data long enough, it will confess to anything. ~Ronald Coase

lakpr
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Re: saving too much?

Post by lakpr » Fri Mar 22, 2019 11:42 am

jwright19 wrote:
Fri Mar 22, 2019 11:35 am
I don't want to derail but I am curious: on the advice to aggressively contribute to Roth IRA and 401k, and get to taxable if possible. Assuming OP is fresh out of college and is FIREing, wouldn't that tie up their savings and leave them without anything until accessible without penalty (assuming they don't make it to taxable)?
Roth IRA contributions can be withdrawn at any time with no penalties. It is only the earnings that would incur penalties if withdrawn before age 59.5.

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jakehefty17
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Re: saving too much?

Post by jakehefty17 » Fri Mar 22, 2019 11:43 am

It's hard to give you a straight answer without knowing your retirement goals/plans, current age, and current savings. You certainly have an aggressive savings goal, and should afford you an earlier retirement.

In general, I'd say you can never save (and invest) too much money, as long as you are happy with your quality of life during this accumulation. This is a highly personal question, and will depend on how important this early retirement goal is to both of you.

Remember to prioritize your investments and be tax efficient:
https://www.bogleheads.org/wiki/Priorit ... nvestments
https://www.bogleheads.org/wiki/Tax-eff ... _placement

I'd rather save too much than too little, in general that seems like the less regrettable option.
"The problem with the world is that the intelligent people are full of doubts, while the stupid ones are full of confidence." -Charles Bukowski

MI_bogle
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Re: saving too much?

Post by MI_bogle » Fri Mar 22, 2019 11:45 am

northtexan wrote:
Fri Mar 22, 2019 10:17 am
I will be graduating in a little over a year, my fiancé and I will hopefully be making lows 6 digits and currently have a plan for aggressive savings and investing for 10-15 years and then hopefully retire. Our goal would be to save about 1/2 of our take home pay in tax deferred and a taxable account to retire on until we are 65.

Has anyone ran in to saving too much and regretting it later on in life?
That depends - are you going to be eating cat food and never going out to do social things in order to afford saving 50% of takehome?

Or are you going to be able to enjoy a reasonable-to-you standard of living while achieving this goal?

If the latter, by all means! Just don't forget to live life

jwright19
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Re: saving too much?

Post by jwright19 » Fri Mar 22, 2019 11:45 am

lakpr wrote:
Fri Mar 22, 2019 11:42 am
jwright19 wrote:
Fri Mar 22, 2019 11:35 am
I don't want to derail but I am curious: on the advice to aggressively contribute to Roth IRA and 401k, and get to taxable if possible. Assuming OP is fresh out of college and is FIREing, wouldn't that tie up their savings and leave them without anything until accessible without penalty (assuming they don't make it to taxable)?
Roth IRA contributions can be withdrawn at any time with no penalties. It is only the earnings that would incur penalties if withdrawn before age 59.5.
somehow, I did not know this. Thank you

radiowave
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Re: saving too much?

Post by radiowave » Fri Mar 22, 2019 12:06 pm

One other thing to consider is the amount saved in tax deferred vs. taxable. Tax deferred typically occurs through employer and many is not most come with a match. So maxing a 401k for example grows tax free until withdrawal but also decreases current tax burden. On the other hand, if you accumulate a lot of assets over time in tax deferred, you may get a tax bump at RMD (required minimum distribution at 70.5 yrs). The other downside of tax deferred is lack of access for living expenses through there are some exceptions. A taxable account give direct access to assets, but may incur capital gains tax. As for saving too much, if the combination of tax deferred (and Roth) and taxable reduce a standard of living below some standard of livability (see reference to eating pet food above), it is certainly worthwhile to save less but that could cause a quandary of not having enough in later retirement. "It's all about balance" :)
Bogleheads Wiki: https://www.bogleheads.org/wiki/Main_Page

Grt2bOutdoors
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Re: saving too much?

Post by Grt2bOutdoors » Fri Mar 22, 2019 12:20 pm

northtexan wrote:
Fri Mar 22, 2019 11:25 am
j0nnyg1984 wrote:
Fri Mar 22, 2019 11:09 am
I think you’d be sacrificing too much to save that amount solely in retirement accounts.

My situation is a little different since I’m single, but I make ~110k and max out my t401k, rIRA, and HSA. I’m also aggressively paying off my house. I don’t feel the need to invest additional funds at this time.

You should definitely max out both IRA’s and HSA’s, and contribute as much as possible to the 401k’s available. 30-40 years of that will see you sitting pretty come retirement time.
Lately I have done some math and calculation with different amount and things, if we were to max out 401k and traditional/Roth IRA it would be about 50k including a company match and then 25k to a taxable. With my current assets after 15 years the tax deferred accounts would be around 1.1M and at 65 years old around 6M (with a 7% annual return). The taxable account would be around 1.2M, and would have to last about 25 years, that is what we are concerned about, but if we have extra money after expenses it would go into the taxable account. If I can make it to 65 on 1.2-1.7M, when I am 65 the real retirement would happen and could enjoy life a little more. I am not really interested in working for 30-40 years unless I can make one of my hobbies in to a income stream (most likely woodworking). If I can live off of that I feel we could easily make it with the taxable account until 65.
You've done the calculations, do your calculations include 2 or 3 bear markets before your retire? Do your calculations with each bear coming 4-5 years apart and the last one comes just before you decide to retire. Let us know how the calculations work out. If you are going to retire early, make sure you have 5 years of expenses on hand in low risk assets always. Another thing, you are what, early20's - my advice to you is to make the most of it, ENJOY IT, enjoy it now, in the present, the 20's come by only once in your life, the same goes for every decade that goes by. Don't fixate your self on accumulating balances, it's nice to have and to see, but don't let it be the measuring stick of you and your fiancees life. Live your life, have a family, don't have a family but don't let the thought of early retirement be the overriding factor in living it. Good Luck! I can't tell you the number of people I know who said the same exact thing you said "when I'm 65 the real retirement would happen and could enjoy life a little more" - those folks, may they rest in peace never got that opportunity. Don't let that be you!! Everything in moderation.
Last edited by Grt2bOutdoors on Fri Mar 22, 2019 12:22 pm, edited 1 time in total.
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runner3081
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Re: saving too much?

Post by runner3081 » Fri Mar 22, 2019 12:22 pm

If you are concerned about saving too much, you feel like you are missing out and are probably saving too much.

dacalo
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Re: saving too much?

Post by dacalo » Fri Mar 22, 2019 3:41 pm

i don't think you can save too much. Better than to be short later, but also reward yourselves when you hit milestones and budget for fun stuff like vacations.

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