If expenses are low, are some of us over saving?

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imfocusedman
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If expenses are low, are some of us over saving?

Post by imfocusedman » Wed Nov 07, 2018 5:28 pm

The thread on Baby Boomer savings brought this to mind. For a higher earning couple, assuming they’re debt free and have a paid off home at retirement, why not aim to have expenses be at/below the expected Social Security benefit? Assuming that’s ~$3k to cover property taxes, healthcare, food, transportation, etc.

I have trouble seeing how that’s not sufficient for most couples in this simplified example.

If that’s the case, then “retirement savings” is not really needed and the strategy prior to retirement would be to 1. Stay employed, 2. Throw all extra at debt and mortgage rather than into savings 3. Spend the rest

Agree?

Update: this thread evolved a bit so ignore the numbers in this post and scan below.
Last edited by imfocusedman on Thu Nov 08, 2018 3:23 pm, edited 1 time in total.

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mhc
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Re: If expenses are low, are some of us over saving?

Post by mhc » Wed Nov 07, 2018 5:38 pm

No, I don't agree, but I agree it may work for some.

What if a person can't work until old enough to collect SS? Stuff happens.

What do you mean by "higher earning"? To me it implies that SS would not be sufficient to cover the life style of a higher earning couple.

What if only one spouse works and there is a large age difference in spouses?

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bottlecap
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Re: If expenses are low, are some of us over saving?

Post by bottlecap » Wed Nov 07, 2018 5:41 pm

So your proposal is to have no retirement savings and live on $36k (maybe) a year during retirement because you have your house paid off?

Sounds like a wonderful retirement. I hope it doesn't last too long!

JT

Trism
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Re: If expenses are low, are some of us over saving?

Post by Trism » Wed Nov 07, 2018 5:42 pm

I plan to do more than just exist and pay bills between the time I retire and when my remains are incinerated.

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unclescrooge
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Re: If expenses are low, are some of us over saving?

Post by unclescrooge » Wed Nov 07, 2018 5:43 pm

You didn't need to have low expenses to be over saving.

Once I realized how much we'll probably have in retirement, I decided to loosen the purse strings a bit.

That does create some internal conflict. For example, when hiring a piano teacher for my daughter, I'm pretty sure I can knock off about 10% from his hourly rate just by asking... However, as a young musician starting out, he probably needs those extra few dollars more than I do. But asking for a discount is so ingrained, I'm really conflicted over this minor amount.

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Re: If expenses are low, are some of us over saving?

Post by Mike Scott » Wed Nov 07, 2018 5:48 pm

If you are content to live at a low level of spending, then you don't need to save as much. Sure, the future is unknown but it seems that there is a lot of anxiety about ending up eating cat food under a bridge some day if you don't have $XXX million. If your worst case scenario is being reduced to a lower middle class life style, you should consider yourself fortunate. There are a lot of folks who dream of moving UP to that economic level.

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Re: If expenses are low, are some of us over saving?

Post by ResearchMed » Wed Nov 07, 2018 5:49 pm

imfocusedman wrote:
Wed Nov 07, 2018 5:28 pm
The thread on Baby Boomer savings brought this to mind. For a higher earning couple, assuming they’re debt free and have a paid off home at retirement, why not aim to have expenses be at/below the expected Social Security benefit? Assuming that’s ~$3k to cover property taxes, healthcare, food, transportation, etc.

I have trouble seeing how that’s not sufficient for most couples in this simplified example.

If that’s the case, then “retirement savings” is not really needed and the strategy prior to retirement would be to 1. Stay employed, 2. Throw all extra at debt and mortgage rather than into savings 3. Spend the rest

Agree?
Purposefully plan to keep retirement expenses below something like $3k per month, including prop taxes (that alone would take $1k/month), healthcare (there goes another >> $500/month), food, transportation?
Even with the maximum SS benefits......

WHY!?

We have no interest in spending retirement sitting at home, not going places (including overseas travel), not attending symphonies/theatre/etc.

And what about help with household chores, and then personal care, and then perhaps assisted living, as aging continues?

And ESPECIALLY for "higher earning" couples, why ever would they voluntarily want to reduce their standard of living so much in retirement, when there is - hopefully - even more time for travel and other activities?

:confused

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Mr.BB
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Re: If expenses are low, are some of us over saving?

Post by Mr.BB » Wed Nov 07, 2018 5:52 pm

Expect the worst, hope for the best. Always better to have a few extra bucks in your pocket.
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Re: If expenses are low, are some of us over saving?

Post by H-Town » Wed Nov 07, 2018 5:58 pm

imfocusedman wrote:
Wed Nov 07, 2018 5:28 pm
The thread on Baby Boomer savings brought this to mind. For a higher earning couple, assuming they’re debt free and have a paid off home at retirement, why not aim to have expenses be at/below the expected Social Security benefit? Assuming that’s ~$3k to cover property taxes, healthcare, food, transportation, etc.

I have trouble seeing how that’s not sufficient for most couples in this simplified example.

If that’s the case, then “retirement savings” is not really needed and the strategy prior to retirement would be to 1. Stay employed, 2. Throw all extra at debt and mortgage rather than into savings 3. Spend the rest

Agree?
If you won a lottery for $10M, would you stay employed until 60? Isn't the goal to save for retirement/financial independence is that you can go to work on your own terms?

quantAndHold
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Re: If expenses are low, are some of us over saving?

Post by quantAndHold » Wed Nov 07, 2018 6:10 pm

Now that I’ve been retired for a couple of years, with that paid off house, and I’m tracking spending, I realize that our actual expenses are somehow about half what I thought they would be, and we probably oversaved. But I would rather have a cushion against unplanned catastrophic failure of my plans.

In the meantime while we’re waiting for catastrophe, we’re loosening the purse strings a bit. We don’t need to be as zealously frugal as we were the first year. Some international travel is on the schedule for 2019.

delamer
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Re: If expenses are low, are some of us over saving?

Post by delamer » Wed Nov 07, 2018 6:10 pm

A high earning couple retiring at FRA is going to have SS benefits more in the range of $5,000+, than $3,000.

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Re: If expenses are low, are some of us over saving?

Post by aerosurfer » Wed Nov 07, 2018 6:11 pm

H-Town wrote:
Wed Nov 07, 2018 5:58 pm
imfocusedman wrote:
Wed Nov 07, 2018 5:28 pm
The thread on Baby Boomer savings brought this to mind. For a higher earning couple, assuming they’re debt free and have a paid off home at retirement, why not aim to have expenses be at/below the expected Social Security benefit? Assuming that’s ~$3k to cover property taxes, healthcare, food, transportation, etc.

I have trouble seeing how that’s not sufficient for most couples in this simplified example.

If that’s the case, then “retirement savings” is not really needed and the strategy prior to retirement would be to 1. Stay employed, 2. Throw all extra at debt and mortgage rather than into savings 3. Spend the rest

Agree?
If you won a lottery for $10M, would you stay employed until 60? Isn't the goal to save for retirement/financial independence is that you can go to work on your own terms?
Well not everyone hates their job for one. Others have a motivation to do well with their talents and skills in spite of money.

I fly commercial airliners. I love what I do, I'm highly compensated, and I have the ability to usually drop flying and not work harder than I need to. A winning lotto ticket is creak on the coffee to me. Perhaps new interests would ultimately pull me away from the airlines, but I really cant see me leaving much before FAA mandatory retirement, age 65.

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Re: If expenses are low, are some of us over saving?

Post by mbasherp » Wed Nov 07, 2018 6:29 pm

I agree with the OP. If I didn’t have a mortgage, 3k/month covers our current lifestyle, which I feel is unconstrained.

As long as we can pay off our home beforehand, we should be fine on Social Security alone. We save to add cushion to that and to aim for FI at some point well before then. We will likely always work in some way or other, but to be insulated from any reasonable financial worry in life is a major goal.

After that, our portfolio will hopefully enable us to give help to our community, extended family and worthy causes around the world. Keeping “needs” under control in favor of this approach has no downside that I see.

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wander
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Re: If expenses are low, are some of us over saving?

Post by wander » Wed Nov 07, 2018 6:49 pm

Will Social Security still exist when I retire?
It's true that Social Security will soon start paying out more benefits than it receives in contributions, as the bulk of the baby-boom generation phases into retirement.
The government's official position is that there is enough money saved to pay benefits at the currently scheduled amounts until 2035. The Social Security Administration admits on its Web site that benefits will likely be reduced after that, barring changes that improve the financial strength of the system.
Social Security’s cash flow has been negative since 2010, meaning that the program has paid out more than it takes in via taxes. Right now it is covering that shortfall with interest on its Treasuries, but that can’t continue indefinitely. While it’s unlikely Congress will do away with Social Security, to close the gap it’s going to have to scale back benefits for future recipients, increase taxes, or both.
---Source: CNN Money---
I save because of this.

quantAndHold
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Re: If expenses are low, are some of us over saving?

Post by quantAndHold » Wed Nov 07, 2018 7:20 pm

wander wrote:
Wed Nov 07, 2018 6:49 pm
Will Social Security still exist when I retire?
It's true that Social Security will soon start paying out more benefits than it receives in contributions, as the bulk of the baby-boom generation phases into retirement.
The government's official position is that there is enough money saved to pay benefits at the currently scheduled amounts until 2035. The Social Security Administration admits on its Web site that benefits will likely be reduced after that, barring changes that improve the financial strength of the system.
Social Security’s cash flow has been negative since 2010, meaning that the program has paid out more than it takes in via taxes. Right now it is covering that shortfall with interest on its Treasuries, but that can’t continue indefinitely. While it’s unlikely Congress will do away with Social Security, to close the gap it’s going to have to scale back benefits for future recipients, increase taxes, or both.
---Source: CNN Money---
I save because of this.
We’re not allowed to talk about legislative changes that haven’t happened yet, but my comment about saving extra for “catastrophe” definitely had things like this in mind. We’re almost capable of living on just social security as it stands now, but I wouldn’t want to be completely dependent on SS for several decades.

sawhorse
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Re: If expenses are low, are some of us over saving?

Post by sawhorse » Wed Nov 07, 2018 7:27 pm

One thing to keep in mind is that the final years of life can often cost a ton. Medicare will cover doctors/hospitals, prescriptions, etc, but it doesn't cover long term care. Long term care easily can run over $100k a year. I suppose those with long term care insurance have less to worry about.

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Re: If expenses are low, are some of us over saving?

Post by adamthesmythe » Wed Nov 07, 2018 8:01 pm

Trism wrote:
Wed Nov 07, 2018 5:42 pm
I plan to do more than just exist and pay bills between the time I retire and when my remains are incinerated.
For sure.

Although- I probably could pay my minimal expenses using social security- and my own, not using my wife's. And I'm not even collecting SS yet.

This is the thing about the "retire early" thing. It might mean living a minimal severely constrained life style. AND it allows more time for your interests/ desires to change. AND more time for the unexpected external events.

I can only see (voluntary) early retirement- as opposed to more or less on time retirement- if the only job I could get was one that I really really hated.

randomguy
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Re: If expenses are low, are some of us over saving?

Post by randomguy » Wed Nov 07, 2018 8:07 pm

imfocusedman wrote:
Wed Nov 07, 2018 5:28 pm
The thread on Baby Boomer savings brought this to mind. For a higher earning couple, assuming they’re debt free and have a paid off home at retirement, why not aim to have expenses be at/below the expected Social Security benefit? Assuming that’s ~$3k to cover property taxes, healthcare, food, transportation, etc.

I have trouble seeing how that’s not sufficient for most couples in this simplified example.

If that’s the case, then “retirement savings” is not really needed and the strategy prior to retirement would be to 1. Stay employed, 2. Throw all extra at debt and mortgage rather than into savings 3. Spend the rest

Agree?
Why in retirement would I be want to go from spending ~14k/month (ie. spending the rest) to 5-6k/month (about what SS gives. Half that when a spouse dies)? I am betting most people would be happier living on a steady 12k or so/month. Sure having a back up plan of living on SS is great (i.e. no the failure case of running out of money at 90 isn't eating dog food) but why would I want to live that way when I don't have to?

Granted I also have no desire to work til 67+ which also makes the staying employed pretty unappealing.
Last edited by randomguy on Wed Nov 07, 2018 8:09 pm, edited 1 time in total.

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Re: If expenses are low, are some of us over saving?

Post by KlangFool » Wed Nov 07, 2018 8:08 pm

OP,

I know that I will not be fully-employed until 62 years old. I had been unemployed for more than 1 year a few times. So, unless and until I reach at least 62 years old or have enough money to survive until 62 years old, I do not know that I save enough.

KlangFool

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Re: If expenses are low, are some of us over saving?

Post by KlangFool » Wed Nov 07, 2018 8:11 pm

imfocusedman wrote:
Wed Nov 07, 2018 5:28 pm
The thread on Baby Boomer savings brought this to mind. For a higher earning couple, assuming they’re debt free and have a paid off home at retirement, why not aim to have expenses be at/below the expected Social Security benefit? Assuming that’s ~$3k to cover property taxes, healthcare, food, transportation, etc.

I have trouble seeing how that’s not sufficient for most couples in this simplified example.

If that’s the case, then “retirement savings” is not really needed and the strategy prior to retirement would be to 1. Stay employed, 2. Throw all extra at debt and mortgage rather than into savings 3. Spend the rest

Agree?
imfocusedman,

<<1. Stay employed, >>

"Man plans, God laughs".
- Yiddish proverb

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Re: If expenses are low, are some of us over saving?

Post by dknightd » Wed Nov 07, 2018 8:14 pm

imfocusedman wrote:
Wed Nov 07, 2018 5:28 pm
The thread on Baby Boomer savings brought this to mind. For a higher earning couple, assuming they’re debt free and have a paid off home at retirement, why not aim to have expenses be at/below the expected Social Security benefit? Assuming that’s ~$3k to cover property taxes, healthcare, food, transportation, etc.

I have trouble seeing how that’s not sufficient for most couples in this simplified example.

If that’s the case, then “retirement savings” is not really needed and the strategy prior to retirement would be to 1. Stay employed, 2. Throw all extra at debt and mortgage rather than into savings 3. Spend the rest

Agree?
Not for me, but do whatever makes you happy!

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Re: If expenses are low, are some of us over saving?

Post by 123 » Wed Nov 07, 2018 8:20 pm

Having savings gives the individual more options and makes a wider variety of choices available.
The closest helping hand is at the end of your own arm.

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Re: If expenses are low, are some of us over saving?

Post by KlingKlang » Wed Nov 07, 2018 8:24 pm

imfocusedman wrote:
Wed Nov 07, 2018 5:28 pm
If that’s the case, then “retirement savings” is not really needed and the strategy prior to retirement would be to 1. Stay employed, 2. Throw all extra at debt and mortgage rather than into savings 3. Spend the rest
1. Stay employed - Job loss, disability, need to care for spouse, children, or parents can occur at any time.
2. Throw all extra at debt and mortgage rather than into savings - Many forms of savings (IRA, 401(k), iBonds) are limited to a certain amount per year and cannot be made up later if they are skipped.
3. Spend the rest - Not a binary decision - Plan to save a reasonable amount then spend the rest.

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Re: If expenses are low, are some of us over saving?

Post by Gibby45 » Wed Nov 07, 2018 8:37 pm

Plan for the worst. Paid off homes still need to be maintained. Real estate taxes can go up, natural disasters can strike (and require large deductible payments), kids or parents can get sick, you can get sick, etc. Try to figure out a realistic worst-case scenario and work backwards from there. You'll probably be just fine, but have a decent cushion or be willing to adjust as issues arise.

imfocusedman
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Re: If expenses are low, are some of us over saving?

Post by imfocusedman » Wed Nov 07, 2018 8:39 pm

Thanks for all the replies. Understanding the nuances and differing opinions, I guess the real question is if ones current expenses (after retirement savings, after HSA, after mortgage, after debt repayment) are less than projected SS benefit, and you already have a decent sized retirement savings balance, should you consider rebalancing retirement savings to allocate against other priorities (like additional debt payments or shorter term cash needs)?

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HomerJ
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Re: If expenses are low, are some of us over saving?

Post by HomerJ » Wed Nov 07, 2018 8:41 pm

imfocusedman wrote:
Wed Nov 07, 2018 5:28 pm
The thread on Baby Boomer savings brought this to mind. For a higher earning couple, assuming they’re debt free and have a paid off home at retirement, why not aim to have expenses be at/below the expected Social Security benefit? Assuming that’s ~$3k to cover property taxes, healthcare, food, transportation, etc.

I have trouble seeing how that’s not sufficient for most couples in this simplified example.

If that’s the case, then “retirement savings” is not really needed and the strategy prior to retirement would be to 1. Stay employed, 2. Throw all extra at debt and mortgage rather than into savings 3. Spend the rest

Agree?
Yes, people can live on Social Security. Especially if your house is paid off in LCOL area. A good life even.

I could easily live at my small paid-off lake condo for $3k a month ($36,000 a year). Especially with health care covered by Medicare.

That would be a pretty good life to be honest. Warm, fed, and dry. View of the lake from my living room. Boat and and a jetski. Long walks along the lakeside, unlimited books from the library, internet access to learn new things. Cold beer and grilling hamburgers and playing cards with the neighbors. Could be a LOT worse.

BUT...

(1) I may not be able to work until 65.
(2) I don't want to work until 65.
(3) I don't want to spend winters at the lake.
(4) I'd like to travel to see my kids, to see friends, to see the world.
(5) I'd like to have a buffer for emergencies.
(6) Medicare doesn't cover everything (and see the part where I want to retire BEFORE I get Medicare)
(7) I'd like to be able to splurge now and then.
(8) My kids may need financial help.
(9) My parents may need financial help.
(10) My siblings may need financial help.
(11) Long-term care.

For all those reasons, we're saving now, and not just spending everything with a plan to live on Social Security.

(1) is huge. A plan that requires that you work until 63-65-70 is no plan. It's not up to you. You could get laid off and be unable to find another job at 57. You better have SOME savings just in case.
Last edited by HomerJ on Wed Nov 07, 2018 9:10 pm, edited 2 times in total.
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Re: If expenses are low, are some of us over saving?

Post by randomguy » Wed Nov 07, 2018 8:47 pm

HomerJ wrote:
Wed Nov 07, 2018 8:41 pm

(1) is huge. A plan that requires that you work until 63-65-70 is no plan. It's not up to you. You could get laid off and be unable to find another job at 57. You better have SOME savings just in case.
To some extent yeah but you aren't talking a ton of savings. 36k/year for 10 years is only 360k for a 57 year old and and 540k for a 52 year old. A bit more if you haven't paid off the house. That is the fraction we of the savings we are talking about traditionally where a 250k/year couple would be looking at more like 4 million.

But again who is going to want to cut their spending in half just cause they retired? Not many. If they wanted to live on 36k/year, they could all have retired decades earlier.

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HomerJ
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Re: If expenses are low, are some of us over saving?

Post by HomerJ » Wed Nov 07, 2018 8:57 pm

imfocusedman wrote:
Wed Nov 07, 2018 8:39 pm
Thanks for all the replies. Understanding the nuances and differing opinions, I guess the real question is if ones current expenses (after retirement savings, after HSA, after mortgage, after debt repayment) are less than projected SS benefit, and you already have a decent sized retirement savings balance, should you consider rebalancing retirement savings to allocate against other priorities (like additional debt payments or shorter term cash needs)?
I don't understand your question.

Shorter term cash needs? What does that mean? Do you want permission to blow some retirement money now on fun stuff? Are you currently spending less than $36k a year? Will the fun stuff money take you over $36k spending?

Need some real numbers actually. Are you tracking your spending? Are you spending less than $36k a year NOW?

It sounds like you are indeed spending less than $36k now, so yes, you could save less and spend more now. I wouldn't touch your existing retirement accounts, and I wouldn't completely stop saving.

But if that new spending takes you over $36k, then you will get used to that lifestyle, and you'll want to have extra so you can keep living at that new higher spending level in retirement.
Last edited by HomerJ on Wed Nov 07, 2018 9:14 pm, edited 2 times in total.
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HomerJ
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Re: If expenses are low, are some of us over saving?

Post by HomerJ » Wed Nov 07, 2018 9:05 pm

randomguy wrote:
Wed Nov 07, 2018 8:47 pm
HomerJ wrote:
Wed Nov 07, 2018 8:41 pm

(1) is huge. A plan that requires that you work until 63-65-70 is no plan. It's not up to you. You could get laid off and be unable to find another job at 57. You better have SOME savings just in case.
To some extent yeah but you aren't talking a ton of savings. 36k/year for 10 years is only 360k for a 57 year old and and 540k for a 52 year old. A bit more if you haven't paid off the house.
There's health insurance too for the years from 52-65, although currently you could game the system to get free ACA. But I certainly wouldn't count on that lasting for another 10-13 years.
But again who is going to want to cut their spending in half just cause they retired? Not many. If they wanted to live on 36k/year, they could all have retired decades earlier.
Sure, if one is living on $36k NOW (plus say another $12k a year on a mortgage), then you don't need to save a lot for retirement, because you'll be able to keep that lifestyle in retirement once SS starts, and the house is paid off. But you will want to save SOME, in case you don't work all the way to 65, and to cover occasional emergencies.

If you're living on far more than $36k now, I agree cutting back a lot in retirement, although possible, probably shouldn't be anyone's PLAN.
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Re: If expenses are low, are some of us over saving?

Post by sailaway » Wed Nov 07, 2018 9:18 pm

You forgot a step: die simultaneously so that no one has to live off the suddenly reduced income.

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Re: If expenses are low, are some of us over saving?

Post by MJS » Wed Nov 07, 2018 9:32 pm

I read the title to mean lower investing expenses, so people could save 1-2% less per year as a result. It seemed like a really nice thought.

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Re: If expenses are low, are some of us over saving?

Post by Grt2bOutdoors » Wed Nov 07, 2018 10:30 pm

aerosurfer wrote:
Wed Nov 07, 2018 6:11 pm
H-Town wrote:
Wed Nov 07, 2018 5:58 pm
imfocusedman wrote:
Wed Nov 07, 2018 5:28 pm
The thread on Baby Boomer savings brought this to mind. For a higher earning couple, assuming they’re debt free and have a paid off home at retirement, why not aim to have expenses be at/below the expected Social Security benefit? Assuming that’s ~$3k to cover property taxes, healthcare, food, transportation, etc.

I have trouble seeing how that’s not sufficient for most couples in this simplified example.

If that’s the case, then “retirement savings” is not really needed and the strategy prior to retirement would be to 1. Stay employed, 2. Throw all extra at debt and mortgage rather than into savings 3. Spend the rest

Agree?
If you won a lottery for $10M, would you stay employed until 60? Isn't the goal to save for retirement/financial independence is that you can go to work on your own terms?
Well not everyone hates their job for one. Others have a motivation to do well with their talents and skills in spite of money.

I fly commercial airliners. I love what I do, I'm highly compensated, and I have the ability to usually drop flying and not work harder than I need to. A winning lotto ticket is creak on the coffee to me. Perhaps new interests would ultimately pull me away from the airlines, but I really cant see me leaving much before FAA mandatory retirement, age 65.
Eh, keep flying the birds and donate some of your winnings in the form of free drinks/meals for your passengers. :)
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Re: If expenses are low, are some of us over saving?

Post by Dottie57 » Wed Nov 07, 2018 10:42 pm

unclescrooge wrote:
Wed Nov 07, 2018 5:43 pm
You didn't need to have low expenses to be over saving.

Once I realized how much we'll probably have in retirement, I decided to loosen the purse strings a bit.

That does create some internal conflict. For example, when hiring a piano teacher for my daughter, I'm pretty sure I can knock off about 10% from his hourly rate just by asking... However, as a young musician starting out, he probably needs those extra few dollars more than I do. But asking for a discount is so ingrained, I'm really conflicted over this minor amount.
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Re: If expenses are low, are some of us over saving?

Post by Dottie57 » Wed Nov 07, 2018 10:55 pm

imfocusedman wrote:
Wed Nov 07, 2018 5:28 pm
The thread on Baby Boomer savings brought this to mind. For a higher earning couple, assuming they’re debt free and have a paid off home at retirement, why not aim to have expenses be at/below the expected Social Security benefit? Assuming that’s ~$3k to cover property taxes, healthcare, food, transportation, etc.

I have trouble seeing how that’s not sufficient for most couples in this simplified example.

If that’s the case, then “retirement savings” is not really needed and the strategy prior to retirement would be to 1. Stay employed, 2. Throw all extra at debt and mortgage rather than into savings 3. Spend the rest

Agree?
Heck no.

Costs will go up. SS may be cut. Your house will need maintenance. Medical needs may come to play depending on status of Medicare. If you spend more now, you will want to spend same later. You are not realistic.

This is really a put up question right?

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Re: If expenses are low, are some of us over saving?

Post by randomguy » Thu Nov 08, 2018 2:02 am

HomerJ wrote:
Wed Nov 07, 2018 9:05 pm
randomguy wrote:
Wed Nov 07, 2018 8:47 pm
HomerJ wrote:
Wed Nov 07, 2018 8:41 pm

(1) is huge. A plan that requires that you work until 63-65-70 is no plan. It's not up to you. You could get laid off and be unable to find another job at 57. You better have SOME savings just in case.
To some extent yeah but you aren't talking a ton of savings. 36k/year for 10 years is only 360k for a 57 year old and and 540k for a 52 year old. A bit more if you haven't paid off the house.
There's health insurance too for the years from 52-65, although currently you could game the system to get free ACA. But I certainly wouldn't count on that lasting for another 10-13 years.
But again who is going to want to cut their spending in half just cause they retired? Not many. If they wanted to live on 36k/year, they could all have retired decades earlier.
Sure, if one is living on $36k NOW (plus say another $12k a year on a mortgage), then you don't need to save a lot for retirement, because you'll be able to keep that lifestyle in retirement once SS starts, and the house is paid off. But you will want to save SOME, in case you don't work all the way to 65, and to cover occasional emergencies.

If you're living on far more than $36k now, I agree cutting back a lot in retirement, although possible, probably shouldn't be anyone's PLAN.
Not to get too political but given that ACA has survived the last 2 years, it will be interesting to see what would be required to take it down. It could be come pretty untenable for anyone having to pay full price but that will not affect people who are happy living on 36k/year. Obviously 10+ years is a long time.

To some extent the OP has a point when people start talking about 40%+ savings rates (gross of course:)). If you are having a 40 year working career, you don't need to save that much. You would be fine with 10-20%. It is only when you want to start retiring at 50 at and the like that you need those high savings rates. Retiring at 50 is nice. But so is having an extra 1k/month to spend on living from 22-50. Maybe living it up for those 28 years is more important to you than not working another 10 years. On the other hand going to the extreme of saving nothing, makes little sense. You need to find a balance that works for you

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Re: If expenses are low, are some of us over saving?

Post by MikeG62 » Thu Nov 08, 2018 7:16 am

Trism wrote:
Wed Nov 07, 2018 5:42 pm
I plan to do more than just exist and pay bills between the time I retire and when my remains are incinerated.
Short and sweet - my sentiments exactly.
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rich126
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Re: If expenses are low, are some of us over saving?

Post by rich126 » Thu Nov 08, 2018 7:26 am

On these boards I do think a lot of people over save and probably deny themselves some pleasures with the thought of doing them later, which, unfortunately, won't happen.

But, people are people. For example I used to work with a guy who was obsessed with not spending money, I'm sure he will die with a ton in the bank but he just can't be happy with spending the money (and he has no children). And he has for many decades biked to/from work in most kinds of weather.

I think you just got to do what makes you happy. Ideally people should save something for retirement, but as long as the rest of us aren't on the hook to cover their expenses, its their business.

I have zero plans to work until 65, zero plans to max out social security (unless I simply don't need it at 62 or whenever) since I hope to retire at 60. And if I had a GF or wife who had a good amount of savings, I'd be tempted to take a 30% pension hit and retire at the end of this year. Fortunately I can get health care at 60 and minimize one problem others would have. I'll also have my house paid off in a couple of years (kind of wish I hadn't with the rates going up but that is another story).

But bottom line, yes I think many on these boards are over saving, probably hugely but its their business not mine unless I see them telling people to prepare for extreme situations that just aren't realistic.

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Re: If expenses are low, are some of us over saving?

Post by imfocusedman » Thu Nov 08, 2018 10:46 am

Helpful to hear from everyone and seems that at least some see it the same way I do. I’m not suggesting no savings or extreme lifestyle creep.

I’m suggesting that a couple earning $250k, who might be paying a $4k mortgage and maxing 2 401k’s is “living on” less than $100k/year after taxes, mortgage and 401k savings (and even less than that if they are currently paying off other debts). Since this couple is basically maxing out SS contributions, they will get a great benefit...$5k/month as some have suggested. So their gap (if mortgage is paid) is only about $3k/month, and there are many threads suggesting a $1 million portfolio could easily bring that. However, even with a $0 employer contribution, at this level of savings (although a sub 15% savings rate would be considered incredibly insufficient by Bogelhead standards) this couple would be on track to have far beyond $1M at retirement age.

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JoMoney
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Re: If expenses are low, are some of us over saving?

Post by JoMoney » Thu Nov 08, 2018 11:02 am

$3k + housing would be pretty decent for some people, there are many living a happy retirement on less... Then there are some who imagine it being dreadful to live on twice that.
"To achieve satisfactory investment results is easier than most people realize; to achieve superior results is harder than it looks." - Benjamin Graham

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Re: If expenses are low, are some of us over saving?

Post by KlangFool » Thu Nov 08, 2018 11:09 am

imfocusedman wrote:
Thu Nov 08, 2018 10:46 am
Helpful to hear from everyone and seems that at least some see it the same way I do. I’m not suggesting no savings or extreme lifestyle creep.

I’m suggesting that a couple earning $250k, who might be paying a $4k mortgage and maxing 2 401k’s is “living on” less than $100k/year after taxes, mortgage and 401k savings (and even less than that if they are currently paying off other debts). Since this couple is basically maxing out SS contributions, they will get a great benefit...$5k/month as some have suggested. So their gap (if mortgage is paid) is only about $3k/month, and there are many threads suggesting a $1 million portfolio could easily bring that. However, even with a $0 employer contribution, at this level of savings (although a sub 15% savings rate would be considered incredibly insufficient by Bogelhead standards) this couple would be on track to have far beyond $1M at retirement age.
imfocusedman,

<<who might be paying a $4k mortgage >>
<<So their gap (if mortgage is paid) is only about $3k/month,>>

This may not be true depending on the size of the property tax. My PITI is about $1,800 per month. Even if I pay off my mortgage, I still have to pay about $5,000 per year on the property tax.

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Re: If expenses are low, are some of us over saving?

Post by ResearchMed » Thu Nov 08, 2018 11:15 am

JoMoney wrote:
Thu Nov 08, 2018 11:02 am
$3k + housing would be pretty decent for some people, there are many living a happy retirement on less... Then there are some who imagine it being dreadful to live on twice that.
I suspect an awful lot of this depends upon whether one is living in a LCOLA or a VHCOLA.
It can make a huge difference.

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Re: If expenses are low, are some of us over saving?

Post by magicrat » Thu Nov 08, 2018 11:21 am

imfocusedman wrote:
Thu Nov 08, 2018 10:46 am
Helpful to hear from everyone and seems that at least some see it the same way I do. I’m not suggesting no savings or extreme lifestyle creep.

I’m suggesting that a couple earning $250k, who might be paying a $4k mortgage and maxing 2 401k’s is “living on” less than $100k/year after taxes, mortgage and 401k savings (and even less than that if they are currently paying off other debts). Since this couple is basically maxing out SS contributions, they will get a great benefit...$5k/month as some have suggested. So their gap (if mortgage is paid) is only about $3k/month, and there are many threads suggesting a $1 million portfolio could easily bring that. However, even with a $0 employer contribution, at this level of savings (although a sub 15% savings rate would be considered incredibly insufficient by Bogelhead standards) this couple would be on track to have far beyond $1M at retirement age.
What is your point in asserting what one could or should do under a completely random set of assumptions?

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Re: If expenses are low, are some of us over saving?

Post by marcopolo » Thu Nov 08, 2018 11:49 am

imfocusedman wrote:
Wed Nov 07, 2018 5:28 pm
The thread on Baby Boomer savings brought this to mind. For a higher earning couple, assuming they’re debt free and have a paid off home at retirement, why not aim to have expenses be at/below the expected Social Security benefit? Assuming that’s ~$3k to cover property taxes, healthcare, food, transportation, etc.

I have trouble seeing how that’s not sufficient for most couples in this simplified example.

If that’s the case, then “retirement savings” is not really needed and the strategy prior to retirement would be to 1. Stay employed, 2. Throw all extra at debt and mortgage rather than into savings 3. Spend the rest

Agree?
Unless you are willing to take a really big drop in lifestyle when you retire, i think there is a serious flaw in your thinking.

You are making the assumption of high earner couple that only "needs" $36k/yr. But, even accounting for mortgage, FICA etc., the couple will have quite a bit excess cash flow. Your suggestion is to then "Spend the rest". Sounds great, so now the couple is spending $150k/yr instead of $36k/yr, and saving very little money.

Fast forward to retirement, they have gotten very used to a $150k/yr lifestyle, have very little savings outside of SS, and now has to figure out how to downscale their lifestyle to fit into $36k/yr, no thanks.

There is probably a middle ground where you spend a little more, and still save enough to maintain your lifestyle?

Having had good fortune, we retired early, with plans to actually increase our lifestyle a bit in retirement. I like that better than having to scale back at this stage.
Once in a while you get shown the light, in the strangest of places if you look at it right.

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Re: If expenses are low, are some of us over saving?

Post by basspond » Thu Nov 08, 2018 12:10 pm

My parents retired with a pension less then $30k a year. Had a couple of rentals that they made less then $5k yearly. Their investment balance was low 6 digits. Everything paid for, made a couple very cheap vacations yearly and were happy watching the grass grow. My dad had two major heart surgeries, mom several cancer treatments. If they didn’t have good medical insurance and Medicare supplements, their nest egg would have been wiped out. And when my dad battled dementia for the last 3+ years of his life, that would have eaten into it also except the fact that my mom took care of him and they did have a long term care insurance they didn’t have to make a claim against.

So if you have all your ducks in a row you can maybe take a chance that you will have good health and your insurance doesn’t change its terms. Ours drastically did this year so I am not going to chance anything and heaven forbid I have to rely on the government (you good people) to provide for me and foot my bill.

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Re: If expenses are low, are some of us over saving?

Post by HomerJ » Thu Nov 08, 2018 12:28 pm

imfocusedman wrote:
Thu Nov 08, 2018 10:46 am
Helpful to hear from everyone and seems that at least some see it the same way I do. I’m not suggesting no savings or extreme lifestyle creep.

I’m suggesting that a couple earning $250k, who might be paying a $4k mortgage and maxing 2 401k’s is “living on” less than $100k/year after taxes, mortgage and 401k savings (and even less than that if they are currently paying off other debts). Since this couple is basically maxing out SS contributions, they will get a great benefit...$5k/month as some have suggested. So their gap (if mortgage is paid) is only about $3k/month, and there are many threads suggesting a $1 million portfolio could easily bring that. However, even with a $0 employer contribution, at this level of savings (although a sub 15% savings rate would be considered incredibly insufficient by Bogelhead standards) this couple would be on track to have far beyond $1M at retirement age.
Well sure, you didn't explain it very well at all in your first post.

Yes, of course, it's possible to oversave, and it's certainly reasonable to cut back on your savings, if you're well on your way to your target or even over it.

But remember, if you cut back on your savings, then you're spending more, and if you get used to that new spending level, your savings target is going to be larger to support your new spending level.

And do not count on working until 65. One should be prepared to pay for a few years WITHOUT Social Security checks coming in.

But the math isn't hard. If you have a good handle on your current expenses, and what you'll need in retirement, that's 90% of the battle. From there, the math is pretty easy.
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HomerJ
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Re: If expenses are low, are some of us over saving?

Post by HomerJ » Thu Nov 08, 2018 12:30 pm

marcopolo wrote:
Thu Nov 08, 2018 11:49 am
You are making the assumption of high earner couple that only "needs" $36k/yr. But, even accounting for mortgage, FICA etc., the couple will have quite a bit excess cash flow. Your suggestion is to then "Spend the rest". Sounds great, so now the couple is spending $150k/yr instead of $36k/yr, and saving very little money.

Fast forward to retirement, they have gotten very used to a $150k/yr lifestyle, have very little savings outside of SS, and now has to figure out how to downscale their lifestyle to fit into $36k/yr, no thanks.

There is probably a middle ground where you spend a little more, and still save enough to maintain your lifestyle?
This.
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randomguy
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Re: If expenses are low, are some of us over saving?

Post by randomguy » Thu Nov 08, 2018 1:02 pm

imfocusedman wrote:
Thu Nov 08, 2018 10:46 am
Helpful to hear from everyone and seems that at least some see it the same way I do. I’m not suggesting no savings or extreme lifestyle creep.

I’m suggesting that a couple earning $250k, who might be paying a $4k mortgage and maxing 2 401k’s is “living on” less than $100k/year after taxes, mortgage and 401k savings (and even less than that if they are currently paying off other debts). Since this couple is basically maxing out SS contributions, they will get a great benefit...$5k/month as some have suggested. So their gap (if mortgage is paid) is only about $3k/month, and there are many threads suggesting a $1 million portfolio could easily bring that. However, even with a $0 employer contribution, at this level of savings (although a sub 15% savings rate would be considered incredibly insufficient by Bogelhead standards) this couple would be on track to have far beyond $1M at retirement age.
That is a vastly different problem. Lets look at your couple
Option a) First post. Live on SS only . They will have been used to living on like 11k/month (100k + 36k of 401(k)s) and now have to live on 5k.
option b) Oversave. They will have been used to living on 8k month and now get to live on like 15k/month (5k SS and they will have like a 4 million dollar portfolio)

Obviously both of those suck. Most people want
option C. Live on 10k when working and 10k when retired.

Note that the reason why savings are so low is that a lot of the savings is being sucked up by the house. This couple is putting 20% of their income into housing. This isn't abnormally high for a person buying a new house but for someone that has lived in the house for 20 years (i.e. 20 years of getting 2% COLA raises while your mortgage remains constant or drops with interest rates), it is pretty high. Now some of that money might goto one time expenses (i.e. college and the like)

And lets be clear it isn't "only" 3k. It is 40% of your spending and it will be after basic needs are meet. 36k/year pays for a lot of trips, cars, clothes, hobbies, and so on.

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Re: If expenses are low, are some of us over saving?

Post by Sam1 » Thu Nov 08, 2018 1:52 pm

Good question. We earn 400k HHI+. When you subtract our mortgage, savings, college savings and childcare we spend around $4k per month. So $48k per year. This includes transportation costs. This is eating out frequently, cleaning service, weekly babysitter, taxis etc.

Whereas we are saving around $150k into retirement funds and our private brokerage. The breakdown is $18.5k - 410k, $14.2k - 401k match, $3k 401k match, $18k pension contribution (rolls into 401k if I leave), $15k company stock, ~$100k (roughly 8k per month) = $187k. So this is almost 5x just one year of annual expenses.

The only expense that should increase is healthcare.

I realize many don’t calculate the matches in their savings rate and that’s fine but it’s still going into my 401k and is vested immediately. So it’s for retirement expenses day.

My point is that I almost want to take half of that 100k and either buy a nicer home or travel a lot more with our children. We both stand to inherit money but we don’t count on it. Hard to know what to do.

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Re: If expenses are low, are some of us over saving?

Post by Admiral » Thu Nov 08, 2018 2:10 pm

The short answer to your question is because it's better to have it and not need it than need it and not have it.

Clearly savings versus spending is a balance in terms of lifestyle. This is Bh, not MMM, where frugality trumps all. If you can afford to max out retirement savings and still enjoy the lifestyle you want, that's what you should do. If you can't, then save as much as you can.

SS + Pension will cover much of our retirement expenses...once we receive this money. But that may not be until 67 or 70, and we don't plan to work beyond 58-60. So, 36k per year for 10 years ain't gonna cut it. People may spend less in retirement, but they don't generally lower their general lifestyle... it just costs less (no kids, house paid off, no longer saving, etc).

$3k per month would pay taxes and insurance (on a paid off house), utilities, and groceries for us. That's it. I don't call that livin!

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Re: If expenses are low, are some of us over saving?

Post by jharkin » Thu Nov 08, 2018 2:39 pm

A "high earning couple" probably lives in a HCOL area.

$3k a month (I am assume you meant per month) might only cover property taxes and healthcare in a really high cost area - Where does the rest come from? Is this theoretical couple riding the bus, eating ramen, and getting their clothes form a thrift store?

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EDIT: reading the rest of the thread I see you are talking about 3k + social security. Thats a whole different ballgame. Might want to edit the first post.

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