The We’re Saving Too Much Is Spreading Like Wildfire

The Wall Street Journal jumped in to the we’re saving too much pool the other day following and quoting from a similar piece from Morningstar. Before getting into this, saving too much–if it applies too anyone at all–applies to very few people but it is more likely to apply to people who are interested enough in investing to read related blogs.

A lot of things on this topic seem to be mislabeled. For years I have been saying that people need to try to figure their expenses not their income. My neighbor with the backhoe retired from a career in law enforcement about 30 years ago (he is 82 and he and his wife are both incredibly fit). When do you think was the last time his final salary had an relevance for him?

Like anyone else, you would have to imagine that some expenses went up and some went down. Like anyone else there is some number at the bottom of the spreadsheet every month that changes every so often and like anyone else there must be some number of one-off expenses that come up throughout the year. Chances are that there is never a discussion between Mr. and Mrs. Backhoe that includes a reference to his salary in 1982.

The article makes some very good points about expenses. Whatever your savings rate is, that can come right off your calculation same with FICA unless you continue to work. Obviously retiring without a mortgage can make things easier on that monthly number but my thoughts are evolving on this point.

The experts all say that people spend more on activities like travel during the earlier retirement years and anecdotally that seems correct to me so clearly not having a mortgage during this time leaves more in the budget for lifestyle spending. What about when you are 85 and hopefully still fit but are starting to think about downsizing out of the mortgage-free house.

As a simple example if you can sell your house for $350,000 when you’re 87 (and can hopefully still live on your own if you want) and you find a condo for $150,000, maybe you should buy the condo outright but why not put just $30,000 down and get a mortgage? A lot of the people I have spoken to that are interested in moving (downsizing or not) don’t seemed phased by taking on a mortgage in their 60’s or 70’s

There could also be scenarios where downsizing into a rental might make sense.

In regard to traveling in the earlier years of retirement I may have stumbled into something in the post the other day which is to get to some of your trips of a lifetime before retirement if possible like maybe one a decade or more by traveling cheaply if you can figure out how (it is not that difficult) and are willing to do so. We went to New Zealand in 2005 for ten nights and had a free place to stay for eight of them. With some diligent planning an expensive trip can be made less expensive. Obviously more trips to Yellowstone and Yosemite in retirement will be much cheaper than trips to Africa and Antarctica.

My latest article for theBright on personal finance for firefighters is posted and it is about monetizing your hobby (please check it out) in retirement which of course is something we’ve been talking about here for many years.

This seems like the least painful solution to filling the financial gap that some people (many people?) will have in retirement but it will not be handed to you. I have no idea where my firefighting is heading or whether we will ever need it to pay the bills (probably not but I take nothing for granted) but I am 11 years in and it is evolving into what could be a part time job.

Obviously I love the work and enjoy the training immensely which I think is crucial for success in monetizing a hobby where success is defined as enjoyment and a modest income.

I don’t believe the idea of needing to completely redefine what retirement is gets enough coverage but I am convinced it will be crucial to millions of people.

Merry Christmas from Roscoe (pictured above) and everyone else at RandomRoger.


  1. I don’t think this “we’re saving too much” meme is going to gain traction, at all.

    Sure, many people will overestimate their needs in retirement – all that extra time and information available on the internet will show them how to cut corners – but most people are still wary about their financial situations; even those who haven’t been unduly affected over the past recession.

    For those who spent too much, they’ve probably been through difficult times and won’t want to repeat them. For those who were careful and/or lucky, they’ve seen their actions reinforced.

    Although this hasn’t been as dire as the Great Recession it’s been close, and we – as employees, ast least – are certainly not out of the woods, by any margin. Although China’s workers’ wages are going up there are still many other countries where low wages can be found.

    On that note – Merry Christmas!

  2. thank you Justin, Merry Christmas to you too!

  3. I’m not understanding why all the articles seem to assume we’re all going to live to 100. We’re not, check with your insurance company. At 87 the vast majority of us will be dead so why use that number for anything other than a disaster scenario.

  4. Merry Christmas Roger.

    You make several points this morning-all excellent!

    Re: mortgages. You NEVER own your home free and clear. The tax man is even more heartless than the banker. What’s the difference if you owe the taxman or whether you owe the taxman+banker. It is the size of the lug that matters.

    Re: 11:16 comment. It is bad enough to get old but to get old and be broke would be just awful.

    I think planning to leave an estate is a must insurance plan.

  5. In a low inflation environment, when the stock market is soaring – or both, these type of thoughts gain traction.

    My questions are, would one rather have too much or too little saved for retirement? Is the stock market the only place to be with one’s retirement nest egg?

    There is no Goldilocks result stating the exact median of having too much or too little saved for the back nine of life, at least from anything I have read. Better to err on the “too much” (sic) side.



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