Signs You Are Saving More Than You Need for Retirement

Shot of a senior couple having coffee together at home.
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Conventional wisdom is to start saving early for retirement and be consistent with it. Given inflation and economic concerns, 90% of seniors say there is a retirement crisis in the country, according to  an American Advisors Group survey, so there is reason to worry. But is there a point for some Americans when they have saved too much?

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“Many retirees are finding themselves wanting to retire but unfortunately not having enough money to retire,” said Ben Reid, GM of M1 Finance. “And as the cost of living will continue to go up in the future, investing too much for retirement is a problem worth having — rather than not having enough money in retirement.”

A new GOBankingRates survey found that a whopping 37% of Americans have not started saving for retirement, while 27% have $10,000 or less saved. In addition, 15% have between $10,000 and $50,000 saved; 8% have between $50,000 and $100,000; 9% have between $100,000 and $500,00; a meager 4% have between $500,000 and $1 million; and just under 2% have more than $1 million.

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As a general rule of thumb, Fidelity recommends setting a goal of 15% of your pre-tax income each year, which includes any employer match, said Rita Assaf, vice president of retirement products at Fidelity Investments.

“Fidelity guideline is to aim to save 10 times your pre-retirement income by age 67,” Assaf said. “Breaking this down by age, aim to save at least one times your income by age 30, three times by 40, six times by 50 and eight times by 60. This guidance is based on an individual or household’s ability to cover estimated retirement expenses in a down market.”

But, on the end of the spectrum, is there such a thing as saving more than you need for retirement? And if so, where else should you put your money to work?

Experts Suggest Saving 25 Times Your Annual Expenses

According to some experts, a good way to determine whether you have saved enough for retirement is to aim for 25 times your annual expenses — a rule that assumes you’ll need to withdraw 4% of your savings annually to cover your expenses in retirement without running out of money.

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“Of course, this is just a rough estimate and the exact amount you’ll need depends on various factors, such as your lifestyle, health, inflation and other sources of income,” said Andrew Latham, certified financial planner and director of content of “If you’ve hit your retirement savings goal, congratulations! However, it’s important to remember that retirement planning isn’t just about saving money. Investing, estate planning and tax strategies can all play a role in ensuring a comfortable retirement.”

Latham added that it’s always better to err on the side of caution when it comes to retirement savings.

“While you may not need every penny you save,” he said, “having a surplus can provide you with added security and flexibility in your golden years.”

Where Should Pre-Retirees Be in Terms of Savings?

Some experts argue that there are other factors to take into account when determining when “too much is too much” for retirement, such as price fluctuation, inflation and the slew of personal and economic unknowns.

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“I like to tell people that they should save enough money so that once they retire they don’t have to cut back their lifestyle,” said Howard Dvorkin, CPA and chairman of “Today, many people retire with debt that eats up their retirement income.”

Dvorkin said Gen Xers should pay off their homes, cars and credit cards before they retire, then they should max out their 401(k) plans and IRAs while making extra contributions if they can. 

For millennials, who are heading into their prime earning years of ages 35-45, they need to set retirement as a top priority. Meanwhile, he recommends that Gen Z Americans open Roth IRAs as soon as they can.

“Compound interest is a magical thing, and even a few hundred dollars a month can grow when you start investing young,” Dvorkin said. “For example, a 22-year-old who set aside $100 per month and earns a healthy 10% return compounded annually would have over $700,000 when they reach age 65. But if they started investing the same amount at age 15, it would be nearly doubled.”

Does Location Matter for Retirement Savings?

While costs of living vary wildly across the country — e.g., New York and the West Coast are notoriously more expensive than the Midwest and the South — some experts argue that it should not have an impact on the thought process and the commitment to saving for your future.

“Who can say if in 20 years the West Coast and New York will be as expensive as they currently are, with people moving in droves to the South and the Midwest?” Dvorkin said. “As time goes on, costs across the country could level out to a greater degree.

“And I would not advise that millennials or Gen Z bank on living on Social Security. Today it’s a supplement to retirement income, not a substitute for it. Many people speculate that it may end at some point. My advice to all Americans is to save as much as you can, don’t carry unsecured debt and live to be happy not to purchase things.”

If You Feel Comfortable With Your Retirement Goals, Now What?

While the amount you should invest for retirement depends on goals, what you plan to spend and when you got started, the contribution rate, which does not change based on location, and the amount you have saved should allow you to maintain your current lifestyle in retirement regardless of the expenses you may be used to.

But, if you are already hitting that mark, then you could still contribute more to retirement to allow you to retire sooner or spend more in retirement. But that could come at the expense of other goals, said Kendall Meade, certified financial planner at SoFi.

“It is important to sit down and think through what goals are most important to you, when they will occur and prioritize,” Meade said. “It may make sense to invest in a taxable account for other goals that may take place sooner. Retirement accounts cannot be accessed until age 59 1/2 without penalties; so, for shorter term goals — such as a down payment — you will want money that is outside of these accounts and accessible to you now.”

In addition, make sure you take your entire financial picture into account. If you have high-interest debt, insufficient funds to cover regular expenses or inadequate liquidity to cover you in an emergency, you might want your retirement contributions to be lower, said Nilay Gandhi, senior wealth advisor at Vanguard.

Gandhi added that, outside retirement, many of your goals may have a shorter time horizon, such as saving to buy a home or planning for a wedding.

“If you’re already contributing 12% to 15% of your income and are close to or meeting contribution limits for 401(k), 403b or Roth IRA,” Gandhi said, “you may want to consider other investment vehicles that allow you to withdraw earlier without penalty, such as brokerage accounts. These can help your funds grow over time as opposed to sitting in a bank account.”

If you’re feeling comfortable with your retirement savings, it’s important to prioritize other financial goals and needs. A good place to start is with your emergency fund, which should be able to cover the potential stressful and costly financial surprises life throws your way, Gandhi said.

Additional factors that should influence where you put your extra funds are your goals, time horizon and risk tolerance.

“Having too much cash on the sidelines won’t allow you to grow your savings, but allocating funds to less liquid investment vehicles won’t leave you with as much flexibility,” Gandhi said. “It might be a good idea to consider cash alternative products like high-yield savings accounts, cash sweeps, money market mutual funds, certificates of deposit and more, which can earn you a higher return on your money while satisfying safety and liquidity needs.”

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About the Author

Yaël Bizouati-Kennedy is a full-time financial journalist and has written for several publications, including Dow Jones, The Financial Times Group, Bloomberg and Business Insider. She also worked as a vice president/senior content writer for major NYC-based financial companies, including New York Life and MSCI. Yaël is now freelancing and most recently, she co-authored  the book “Blockchain for Medical Research: Accelerating Trust in Healthcare,” with Dr. Sean Manion. (CRC Press, April 2020) She holds two master’s degrees, including one in Journalism from New York University and one in Russian Studies from Université Toulouse-Jean Jaurès, France.
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