Should we save less for retirement?

Gwen Merz had just graduated from college in 2014, working a computer job she hated, when she decided that early retirement was the way to go. She saved every dollar she could, saving up to 70% of her income so that she could quit smoking at 35.

Now 30, Merz thinks she may have saved too much. His work and life goals have changed, but most of his $ 300,000 in savings are in retirement accounts that cannot be touched without tax penalties. If she could start over, she says she would either save less aggressively or put some of the money in a taxable investment account with less strict withdrawal rules.

“I would pay a little more tax on my salary, but I would have this money at my disposal,” explains Merz, who lives in Saint-Louis.

Some people save huge sums of money to be able to retire early or because they fear they won’t have enough for a comfortable retirement. But aggressive saving can come with significant and sometimes unexpected costs, which is why it’s important to find the right balance between saving for the future and living your life today.


A lot of people have a hard time saving for retirement, so the idea of ​​saving “too much” might seem like nonsense. But there is a movement known as “financial independence, early retirement,” or FIRE, which encourages enough savings to control how you spend your days well before normal retirement age. Some FIRE bloggers have retired into their 30s, well-paying jobs drastically cutting expenses and saving 50% or more of their income.

Saving for a 20-year retirement is hard enough. Planning for one that lasts 50 years or more often requires extreme frugality before and after retirement, as FIRE members try to make their money last.

The FIRE movement inspired Merz to set his initial goal of early retirement. However, after finding a nicer job and buying a house, Merz lowered his savings goals and now plans to retire at age 55. An unexpected bonus of saving less aggressively: she is less stressed about money.

“I always felt like I could do more because there were people online doing more than me,” Merz says. “I really put a lot of unnecessary stress and tension on myself. “

Chartered Financial Planner Malcolm Ethridge of Rockville, Maryland, doesn’t try to dissuade his clients from retiring young. Many work in well-paying but demanding jobs in tech or finance and feel exhausted by 80-hour work weeks.

“You’re well paid for the time you put into it, but it’s not sustainable,” says Ethridge. “There is only one time that you can burn both ends of the candle before it disappears. “

Instead, he encourages them to save enough so they can move on to a job they’re more passionate about, like teaching, working for a nonprofit, or starting a business.

“It’s not so much ‘I hate work’ as ‘What I do for a living takes a ton of my time and I don’t feel like it makes the world so much better’, says Ethridge. .

Working at least part-time in retirement can not only reduce the amount you need to save, but also provide structure and purpose, says Ethridge.

“Retiring at 30 with $ 2 million is good. I feel like I’ve taken over the world, ”says Ethridge. “But I have nothing to do and nothing to hang on to.”


Merz says that although she saved most of her income, she still enjoyed the occasional splurge, like trips to Australia and Ecuador and a $ 4,000 sewing machine for her quilting hobby.

Some super-savers, on the other hand, are so focused on their future that they neglect their present, says financial planner and registered physician Carolyn McClanahan of Jacksonville, Florida. As someone who has worked in hospital emergency rooms, McClanahan knows the future is not guaranteed.

“We see people dying far too soon or contracting a serious illness that completely changes the course of their lives,” says McClanahan.

McClanahan wants people to save enough to live comfortably after retirement, but also to start working on their Experiences List long before they leave work. If they like to travel or spend time with their family, for example, she recommends that they don’t wait until retirement to start.

“It’s about making sure that if they found out that they were going to die tomorrow, they would be at peace with what they did,” she said.


This column was provided to The Associated Press by the personal finance site NerdWallet. The content is for educational and informational purposes and does not constitute investment advice. Liz Weston is a columnist at NerdWallet, a certified financial planner and author of “Your Credit Score“. Email: [email protected] Twitter: @lizweston.

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