Are You Saving Too Much for Retirement? (It’s More Common than You Might Think)

We hear a lot of horror stories these days about people saving too little, but the fact is that some people are actually saving too much for retirement. It is possible to have too much of a good thing… 

saving too much for retirement

It’s safe to say that my grandfather is one who saved too much because even though he lived for 30+ years after retiring at the age of 65, he died with more money than he could have ever used while alive. He was born in 1901, and anyone could see the impression those times made on him by how he lived. When he retired at the age of 65, with a net worth north of $1 million, my grandfather continued to live in the same simple home with no mortgage. He drove a car that was at least two decades old and kept a broomstick propped against the refrigerator door to keep it closed because the seal had broken years ago.

A combination of good genes and healthy habits meant he lived to be just a month shy of his 97th birthday, but it’s doubtful that he ever truly enjoyed the fruits of all of those years of scrimping and saving. He never traveled, didn’t purchase anything for himself beyond the basic necessities, and his only hobby was watching the weather channel.

But after 65 years of frugal living, that behavior was ingrained. He wasn’t suddenly going to start wearing Gucci loafers and wintering in the Maldives.

How Many People Are Actually Saving Too Much for Retirement?

David Blanchett, Head of Retirement Research at Morningstar Investment Management published the results of his research into estimating the true cost of retirement and found that many retirees actually need about 20% less in savings than the common assumptions for retirement savings would indicate.

And, given that around 40% of Americans expect to leave a financial inheritance to their children reveals that many retirees may indeed have more than enough for their own secure future.

Why Are People Saving Too Much?

There are a variety of reasons why people save too much for retirement.

Erroneous rules of thumb

For years, the rule of thumb has been to replace 70 to 80% of your working wages to live comfortably in retirement.

However, Blanchett’s analysis found that some retirees can actually live quite comfortably on a little more than half of their working income and inflation has a much smaller effect on retiree spending.

So, who is right?

Well, one of the difficulties with figuring out how much to save for retirement is wading through the different kinds of advice.  So much of what you read is a one-size-fits-all formula with so many unknowns and a lot that is not relevant to YOU.

Figure out how much YOU need.

Planning can be hard

Another problem is that there are a lot of guesses you have to make to know how much you need: If you retire at the age of 65, how long will you live? What will your medical or long-term care expenses be? Will you live through periods of runaway inflation or a stock market crash? Will your adult children fall on hard times and need financial help?

How much any given retiree will spend in retirement varies dramatically based on personal circumstances and lifestyle.

Those that don’t spend money, are often the ones who save money

And, it’s ironic, but the biggest savers are typically the ones who need the least amount of money in retirement, mostly because they’ve become accustomed to living well below their means.


You spend the majority of your life earning a paycheck. And, if you are wise, you’ve been saving. That is a hard habit to break, especially when you start to feel really good about those savings.

Thinking about spending those savings you have worked so hard to accumulate can be a hard behavioral shift.


Fear is one of the most powerful motivators. And, no one wants to end up penniless. The more you save, the less chance you have of running out of money.

And, fear of the unknown is a reasonable thing to worry about.

One More Year-ism

Many over savers suffer from a disease called one-more-year-ism.  They keep delaying retirement for just one more year so that they can save just a bit more and avoid tapping their savings for just a bit longer.

One more year can actually mean significant money. Learn what one more year might really means to your finances.

Advice for Over-Savers

If you run the numbers and discover that you’ll likely need less in retirement than originally thought, nobody is suggesting you STOP saving. However, make sure that the sacrifices you are making in order to save for retirement don’t come at the expense of enjoying your present life.

Here are 9 tips for people who are saving too much for retirement:

1. Take a good look at the numbers

Many people who are not saving enough have simply not taken the time to figure out exactly how much they need.  The same is probably true of people who are saving too much for retirement.

If you use a retirement planning calculator that is detailed and personalized enough to help you feel confident about your future, then you may be better able to relax your tendency toward saving.  The NewRetirement Planner even let’s you try different scenarios so you can feel confident about how much you might need given different sets of contingencies.

2. Plan for the unexpected

A lot of people over save because they want to be ready for anything and everything that might go wrong. You can’t plan for everything, but here are tips for planning for the unexpected.

  • Guarantee your retirement income and try to inflation proof it
  • Be adequately insured
  • Know how you’ll fund long term care
  • Have flexible sources of money and some cash on hand
  • Worry less about optimizing and more about protecting yourself from risks

Learn more about preparing for everything that can go wrong.

3. Rediscover hobbies

My grandfather received a set of golf clubs at his retirement party – a gift that collected dust while he sat watching the weather channel for the next 30 years. Is that how you want to spend your retirement years? Working and raising children often results in people forgetting about hobbies and activities they enjoy.

If you’ve lost sight of what you enjoy doing in your free time, work on rediscovering those passions.

Stuck for what you might want to do?  Try one of these resources:

4. Develop relationships outside of work

Our consumer-driven society has trained everyone to believe that more stuff will make us happy, but often the opposite is true. Paying for more stuff means working more hours, and we forget about what really makes us happy, which is spending time with people we like.

Cultivate relationships that matter the most to you, with family, friends, people at church or in a social group.

5. Assess what working and saving is doing for you

If you think you are saving too much for retirement, ask yourself some hard questions.  Saving too much is never a bad thing, but you don’t want to have regrets in the future.  Why are you so focused on frugality and saving?

Many people genuinely love their work and leisure gives them more stress than the daily grind and excitement of their career.

Other people are living to work instead of working to live.  Your career may be lucrative, but is the stress of your job taking a toll on your health? You could be saving for a long retirement that you’ll never get to enjoy if long hours and stress are making you sick.

6. Invest in other things besides your bank account

Sometimes, the best savings plan is investing in your health, family, and social and intellectual connections. Take the time to exercise and eat healthfully and enjoy people and leisure pursuits. If your job makes that impossible, consider a career switch, even if that means a smaller paycheck. Some of that excess savings might be put to better use in a small business you’ve always dreamed of starting.

7. Start small

If you are an over saver, you are probably extremely disciplined and not fast to make a big splurge with either your time or money.

It’s okay to start small.  For example: you don’t have to spring for tickets around the world, but you could try out a weekend away at a hotel slightly out of your frugal budget.

8. Go slow, take time to develop new habits

Most importantly it is important to give yourself time to adjust to the idea of enjoying life instead of worrying too much about money.

A study found that it takes 66 days — on average — for something to become a habit.  The range was 18 days to nearly 3/4 of a year for people to ingrain a new behavior into their lives.  And, this research was focused on relatively simple behaviors like drinking a glass of water with lunch — not whole lifestyle changes.

Of course, it’s better to have too much money saved for retirement than not enough. But don’t deny yourself life’s pleasures to maximize your nest egg. Some people compromise their lifestyle today for what they think will be their golden years tomorrow. Your golden years are right now.

Save for retirement, but make sure you’re also accumulating experiences and hours spent with loved ones and friends. After all, that’s the true measure of a life well spent.

9. Create a detailed plan to help you gain confidence that you have saved enough

Many people keep working and saving because they just aren’t confident that they have enough.

Building and managing your own detailed retirement plan is a great way to find confidence and clarity for how much you really need.

Get started with the NewRetirement Retirement Planner, the most comprehensive set of tools available online.

So, How Much Will YOU Really Need for Retirement?

So how can you tell how much savings you’ll need? While the 70 to 80% rule works well for people with 20 to 30 years to go before retirement, if you are nearing retirement age, a better method is to create a detailed retirement plan.

If you think you need $1 million dollars to retire, you might be right… And, good news… you might be wrong! It all depends on your plan.

Create your own detailed plan to see how much you really need. The NewRetirement Planner will help you with the following:

Estimating retirement expenses

How much you need to save is determined somewhat by what you will actually need and want to spend and when.

Go line-by-line through your current budget and document how different expenses will change throughout the rest of life. The more detailed you can get, the better.

Here are 9 tips for estimating your future retirement expenses.

What kinds of retirement income will you have?

Pensions, Social Security, Required Minimum Distributions (RMDs) are the most common sources of retirement income. Your retirement income offsets your expenses and will make your savings last longer.

Run scenarios for assumptions

A big part of estimating how much savings you need is making educated guesses about a wide variety of assumptions:

  • Will inflation be low or high?
  • What will your rate of return be?
  • Will you require long term care?
  • What unexpected expenses might you encounter?
  • Will your home appreciate in value?

You can’t predict the future, but you can run scenarios to see how much savings you need for a wide variety of future possibilities.

How long will you live in retirement?

Another big factor determining if you are saving too much or too little for retirement is how long you will be retired. To get this number, you need:

  • One joyous number — the age when you stop working.
  • And, one somber milestone — your life expectancy age.

Run scenarios for both of these ages. (Use a life expectancy calculator to help you hone in on that number.)

You won’t know how much you need without a plan

All of the above inputs — and more — go into determining if you are saving too much or too little for retirement.

The NewRetirement Retirement planner is one of the most comprehensive planning tools available. It will help you figure out if you are on track to a secure future with either too much or too little in savings.

NewRetirement Planner

Do it yourself retirement planning: easy, comprehensive, reliable

NewRetirement Planner

Take financial wellness into your own hands and do it yourself retirement planning: easy, comprehensive, reliable.

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