Can You Save Too Much For Retirement?

We care as much about you and your lifestyle as we do about your plan . At the Bowman Wealth Group , we want to help you define what matters most and inspire you to go and do it . Your host is Bowman Wealth Group financial advisor Scott Vellon , who , for more than a decade , has provided financial leadership for those he serves .

Each episode I'm talking about something different , be it questions I've been asked , topics that I think are pertinent to folks , or sometimes based off articles that I've seen , which includes today's podcast . But before we get into that , I'm recording this . In mid-August it's very hot here in Roseville and my kids just went back to school .

Kind of hard to believe they are nine and six . I remember back when I was growing up in Michigan we wouldn't go back to school till what ? After Labor Day . But anyhow , that's not why we're tuning in . We're tuning in hopefully to hear something .

And , speaking of tuning in , if there's anything you hear today that prompts a question or you want to talk about it further , feel welcome to reach out . You can reach us at askatbowmanwealthcom . So that's ASK . Ask at B-U-L-M-A-N . Wealthcom .

So today's episode I find very interesting because I've seen several articles about it and I just figured why not record a show about this and it's almost a different take on things , because often we're talking about how so many folks are underprepared for retirement . Folks aren't saving enough , and that is the norm . Numbers say that is the norm .

Not enough people are saving enough for retirement . However , is there such a thing as saving too much for retirement ? I know that's hard to believe , but I found some interesting points that I thought were worth discussing .

You know some problems that could arise from maybe saving too much , and what does that mean and why it all leads back to having some form of retirement income plan in place or a plan in general . So that's what we're going to talk about today is is there such a thing as saving too much in retirement ?

And some people are probably listening and be like , oh gosh , if I only had that problem . And let's be honest , there are worse problems to have than having too much money when we get to our retirement years . But let's kind of flesh this out a bit . So we start with .

You know , over the years it's become more of a thing Put as much money into your 401k , put as much money into your IRS , put as much money into an investment account , put as much money into the bank and again , that's a good problem to have in most instances . But it brings up a couple of things in terms of what are you know the flip sides to that ?

And the first one of those things is in our working years , as we're just really putting our nose to the grindstone , working hard . If we have kids , we're raising a family , doing all these things . My kids are nine and six . As they said earlier . They're involved in a lot of things . My son just started soccer . We're just really busy .

But a lot of us are just putting our nose down and working hard , sockin' the money away . As we're putting all this money aside , thinking , hey , we're gonna need X-Mont in retirement , one of the first things that comes to mind is , well , how much will we need in retirement Experts ?

Some experts have said that the average retiree will need 70 to 80% of their pre-retirement income . So if John or Jane Doe is making $100,000 a year in their working years , some of these experts say , well , john or Jane is gonna need $70,000 to $80,000 a year in retirement to live comfortably or to maintain just a normal lifestyle .

That could be from social security , it could be from pensions , it could be from pulling from investments , all of the above , but the going number's been 70 to 80% . However , there have been some studies done recently that show people on average not everyone , but people on average in retirement spend 20% less than even those benchmarks of 70 to 80% .

So what that means is that some experts say , hey , you need 70 to 80% . Well , another study showing that a lot of retirees are spending 20% less than that amount . So what does that tell us ?

You know , I've found with folks that I work with and this is not true in every case , but generally , as people are segueing into retirement , maybe the first few years of retirement , their budgets a little bit higher is they're getting used to not working and maybe catching up on travel or some hobbies , but at the same time , a lot of the spending goes down ,

believe it or not , and of course this is not true in every instance , but we found from our experience as advisors , but also from that study I referenced , a lot of people are spending less . On that same note , as studies say , people are spending less as they age .

Well , one of the factors is certain things they spend money on bring less joy later in life . What does that mean ? Okay , we all know that person . Maybe it's you . Hey , I really wanna travel to Europe . I wanna go to England , any number of places . I wanna go on this big trip . However , I gotta keep working . I'm gonna retire , then go .

You know , you have these thoughts when you're in your 40s , your 50s , then say , you get into your 60s or 70 , and that same trip might not be as exciting Me . For example , I wanna go to England and see a soccer game . I wanna see Manchester United play in person . I'm 43 , I'd like to do that here in my next few years .

Take my family Am I gonna feel that same way at 63 , 65 ? Maybe , I hope , but I don't know that because our tastes change . So if we're always deferring that enjoyment for a later date , who's to say we're even gonna enjoy it then and I know this is kind of an interesting take on it , but there is some truth to that Would you go ?

A question would you go on the same trip at age 70 as you would at age 35 ? And that's that quandary , because you know some folks is , you know , probably go on trips before they're ready in terms of taking a large European trip or something and spending money they don't have . Well , obviously that's a whole other issue .

But you could also argue that if someone is doing well , they're saving , but they're deferring any of that Quote-unquote fun stuff until a much later date . They wait too long . That fun stuff might not be as fun once you get to that point . You're older , your taste change , your health changes .

As I'm getting older , I'm seeing more and more folks around me dealing with health issues . If we're always waiting for that next , well , you know , when I retire I can do this . Well , what if that day doesn't come ? I hate to sound gloom and doom , but it is something worth considering .

There is a book that's relatively new , but I'm seeing it pop up a lot . I have not read it . I do have it saved to read here , I believe , on an audible book . It's called die with zero . Author's name is Bill Perkins and one of the things he says in the book is you know , this zeal to save as much as we can . Save as much as we can .

Well , he also says the extraordinary experiences that can bring happiness again and again . Well , if we're persistently deferring those experiences , that's often not the path that maximizes a long-term happiness . That goes back to what I was just saying . If we're always waiting , deferring that trip to To Europe or that bucket list thing ?

What if we wait too long and that that ship is sailed for any number of reasons ? So , it's just something upon or it's like there's always that fine balance of saving too much , not saving enough . Again , as I said earlier , I'd rather have the problem of saving too much , but I think of just myself . Do I want to put off all of that stuff ?

When my wife and I are still Great health ? My kids are at an age where they can remember these experiences . I want them to have those experiences because 20 years from now , 25 years from now I'm retired , my kids aren't gonna want to go on those trips with us . So it's just food for thought of .

There is a detriment in some instances to save too much in deferring fun stuff for a later date , in as I use the example of travel and that goes hand-in-hand with some of these studies that a lot of people are spending less in retirement than they thought .

So that comes back to , as I'm gonna reference a couple times and I say this probably every other podcast having some form of plan is so important and Like mapping those things out . Be it , you're retiring in five years . I I've been talking with some folks that are younger than me .

They're in their mid 30s and you know they want to retire in 20 years and they said . I want to see how I can get to 55 and retire , but I don't want to do it at the detriment of the next 20 years . I don't want to postpone everything in my life to make sure that I can retire at 55 .

That's important to me , but so is the next 20 years , and that really got me thinking . That , combined with these articles that have been reading about saving too much , is just like the delayed gratitude in some instances is good . We want to have some discipline , but not to a fault . So that's one of the takeaways .

And that goes back to the plan of if we can map these things out and say I'm creating a plan for someone and they're gonna retire in , say , 10 years , and we can map it out and say , hey , if you , you know , if you follow on this course , you're gonna be able to retire we can still , within that plan , say in Next summer I know you want to go on that

European trip , it's gonna cost 25 grand , we can plan for that . And if it works within the plan and we can show you in black and white figures , well then it's probably gonna influence our decision in a positive way , knowing I Can still stay on track to retire , but I can still enjoy the time in between , and , again , that's where a plan comes into place

. I think a bigger potential problem , though , that can arise by saving too much is the dreaded t-word , which is taxes . We don't need to go on and on about this in terms of taxes going up , but I think most of us would agree that tax rates are probably gonna increase over time .

The current tax structure sunsets or ends at the end of 2025 and from January of 2026 and on , we're gonna be under a different tax structure . As of right now , the preliminary numbers are showing it's gonna be higher and moving on and on in time , I think those numbers are gonna go up . So what does that mean ?

Well , if we're saving as much as we can into , say , a traditional 401K , well , if we're not gonna be tapping into these funds for a while say 10 , 15 years from now , what is that gonna do ? If you keep putting money into this account , it's already large . You're getting some 678 , 9% growth .

What is that gonna look like when you're getting into your 70s , your 60s , 70s , and you're having to take this money out ? And if tax rates are up ? Well , you've got this large chunk of money that's all fully taxable .

I've met with someone who has a very large 401K and just recently retired trying to map things out and he's still 13 years away from RMD age , meaning the age when he's forced to have to start taking money out . But on paper it looks great .

You've got this large amount of money and even if you're not contributing to it anymore and he's retired , even with basic growth in 12 years , 13 years , that account could more than double . If you know , more than double , like I said , and you get to that point you're forced to take it out , those RMDs could be off the charts .

So one of the things to ponder with this and I've said this in prior podcasts is more and more companies are starting to offer Roth 401Ks . If you've heard of that , great . If you're taking advantage of it , great . If you don't know , if your company has one , it's worth asking .

And , as I said this before , what it means is right now we're getting so used to putting money into a traditional 401K . We get a tax break now but it defers taxes to a later date and we've been saving so much and it's gonna create potential large tax bills . Well , with a Roth 401K , you're paying the tax . Now you get the taxes out of the way .

Now the money goes into the Roth 401K and then , at that point , all of the contributions you make and all the gains you make are tax free forever . So you get 15 , 20 years down the road and you're pulling money out to live off in retirement . Well , those funds are not taxed .

It's such a powerful tool and , as I said a second ago , more and more companies are offering them . So when I'm talking with folks , I always ask them if they're still working , do you have a Roth 401K ? Yes , are you putting into it , yes or no ? I'm not Okay . Well , let's talk about why it might make sense to put money there .

As I said , too , if you're not sure , it's worth asking . If you don't have one , ask the you know your HR people . Is there a way we can add one ?

Because this , if taxes are gonna be an issue and most of us are bothered by taxes and saving too much money can create tax issues in the future why not start addressing that problem now and putting money into a Roth 401K ?

And another thing with the Roth 401K , with a Roth IRA outside of a workplace , if you're under the age of 50 , you can put in 6,500 a year in terms of contributions . If you're over 50 , that number jumps to 7,500 . The point is it's not a huge amount . Meanwhile , with a Roth 401k , if you're under the age of 50 , you could put in $22,500 a year .

If you're over 50 , that number becomes 30,000 . It's such a higher ceiling of contribution that you can put into a Roth 401k . So just a powerful tool .

And , like I said , the reason I bring that up is we've almost been conditioned to just put money into our 401k or traditional 401k and , again , it's a good problem to have , but that can potentially create the tax issue in the future . So that's where I would say look into it to see what that means for you .

And that all goes back to the whole premise of the show . Are we saving too much ? And , as I said , the two potential issues that causes are are we not living today to then postpone that gratification ? And there's enough pundits out there that say , hey , you need to put that off and that makes sense .

You can make the argument for it , but you can also make the argument against . If you're still been disciplined about saving , you know , maybe don't get to such a point where you're putting all of the enjoyment and joy off the table because you're waiting for that later date . Because , as we said earlier , health can change , taste can change .

All these different factors can change . Where you know you don't wanna be 20 years from now . Oh gosh , this is me . I don't wanna be 20 years from now , thinking I wish I would have done taking the kids and more trips , what have you ? Because any number of reasons . So that's something to think about .

And at the same time , saving too much into 401ks can cause taxable issues if we have too much , and one way around that is a Roth 401k . Another way around this I didn't mention this is and this is why working with an advisor can be helpful , working with a CPA can be helpful Roth conversions .

Maybe we are retired and we've got maybe a 10 year gap between now and when we're forced to take money out for RMDs . Well , we can start doing Roth conversions . I know I've done podcasts on this before . And then there's other elements like gifting .

You know I should probably do a whole podcast on gifting , be it to kids , charities , just ways to kinda spend down some of that money , and getting some of the taxable events out of the way , if anything you heard today , or you just have an opinion .

If you have a question or an opinion or a take on it , reach out to us , ask at bullmanwealthcom , ask at B-U-L-M-E-N-WELFcom . If you've been listening , leave a review . If you heard this on Spotify , apple Podcast , audible , all the places that have podcasts leave a review . But thank you for tuning in . It's fun to do these .

I get a lot of great feedback from people and I really appreciate that . But hopefully this triggered some thought in your mind . Am I saving too much ? It's such a unique topic to me . But thanks for listening . I've enjoyed it Until the next time . We'll talk to you soon . ["bullman Wealth"] .

For more information , please visit advisorinfosccgov and search for our firm name . This presentation has been provided for informational purposes only and is not intended as legal or investment advice or a recommendation of any particular security or strategy .

Any statements or opinions expressed should in no way be construed or interpreted as a solicitation to sell or offer to sell Advisory services to any residents of any state other than the states were otherwise legally permitted . Advisory services are offered through Chris Bulman Inc . Dba Bulman Wealth Group and Retirement Wealth Advisors RWA , registered investment advisors .

Insurance products and services are offered and sold through Chris Bulman Inc . Dba BWG Insurance Agency .