Sometimes I think that people have started worrying too much about retirement and are loosing their sleep and happiness over it. It is one thing to be thorough and far-sighted with regards to your financial planning for post-retirement years, but there is this other thing that is called an “overkill”. Answers.com defines the word as “An excess of what is necessary or appropriate for a particular end”.
Before you set some unrealistic goals for yourself you need to sit, think and ask simple questions like “why do I need $5 million in retirement funds after I am 60 yrs old?”, “what if I save just $4 million and spend the remaining $1 million on improving my family’s current standard of living?”, and other questions on those lines. With $5 million you will certainly die rich, but is that your financial goal? I am talking in terms of millions just to make a point, you can replace that with whatever your retirement goals are.
Simply setting a numerical goal is not enough, you need to ask “WHY?”. If you don’t ask this early on, you are going to cause yourself and your close relations a lot of financial stress. Moreover, you will surely reach a point where you have a lot of retirement money, no ideas about what to do with it, and plenty of regrets about what you could have done with it if you had spent it at the right time.
Most PF bloggers won’t like what I am saying, because it doesn’t technically fit in the ideology of “letting go short term gratification for long term gratification”. I subscribe to that ideology myself, but my yardsticks for what is “short term” and what is “long term” are different. For me, the ability to buy something when I “need” it is “long term gratification”. For example, I won’t care if I save $1,700,000 instead of $2,000,000 for my retirement, if I am spending the $300,000 in getting my family a better house in a better location and neighborhood when they need it. And if spending those additional $300,000 will not allow me to maintain my current standard of living after I am 60, so be it (anyways, my most productive years will be over by then). At least I will be a lot happier that I spent the money for a better cause at the right time and that is plenty of long term gratification for me.
Having said this, I want to make it clear that this does not in any way mean that people should not worry at all about retirement. It simply means that they should be resonable when worrying about it.
Bottom line: Not worrying at all about retirement is definitely foolish, but worrying so much about it that you make major compromises in terms of your family’s comfort and standard-of-living, just so that you can live a better life after you are 60 yrs old, is also foolish.
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This is an excellent point. I have been contributing the max to retirement for quite a few years now and if I were to continue it up through retirement, I’d have something like 7.5M in 30 years. It’s conceivable that I’ll be in a higher tax bracket when I start withdrawing my savings in retirement than I am now.
I know I’m still doing a good thing for then, but will I be able to fully enjoy the money at that point?
lazy man and money: I am glad the thought crossed your mind. The post has served its purpose.
7.5M..:) thats a number to smile upon. You will surely need more than a moment to think about how to use that kind of money
Good one. Nicely written and makes a lot of sense.
My calculations have gone bad in the past. I just realized it’s 7.5M in money in 2035 and not adjusted for today’s dollars.
I’m not really going to smile the 7.5M number until I see that in my bank account.
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I do think about this, and I’m glad to see somebody talking about it.
The most significant way I put my family’s current needs ahead of future dollars is by being committed to having only one of us working full time. We could get by if the second parent didn’t work at all, but only if we saved virtually nothing for retirement or college. For us, the balance is having the second parent working half time so we can save adequately, but still having one of us home with our child two days a week.
I am not at all worried about having nothing to do in retirement. Since my day job is not my dream job, I intend to do something closer to my heart (that pays little to nothing) once I retire. I will also travel, read more, take classes, do more craft projects, etc.
It does make me sad to think that some people won’t have hobbies to fill the time but I’m not worried about that for myself.
So how much is enough? How do you determine what an adequate goal is? Is it twenty five times your current gross? And is that enough or could you do with less?
I wonder about that as do others. We cannot see into the future to accurately forecast what is needed or what our circumstances are regarding health and family issues.
I like your advice, trying to find balance. I shall try to do just that.
I’ve been thinking about this a lot lately, actually. On the one hand, I would prefer not to be eating cat food when I’m an old lady; on the other hand, I don’t want to constantly scrimp over everything (for example, if there ever was a time to rent a sports car and have a pretty spendy week, a honeymoon is that time!). It’s a tough balance.
Very thought-provoking post!
I actually just wrote a post today that had me realizing this same point.
You cannot stop living between today and retirement. People and families have needs.
Thanks for sharing such great post, it will surely help many people to get such detailed information.
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