Can You Save Too Much for Retirement?

By Chris Duderstadt

June 30, 2023

Can You Save Too Much for Retirement?

Key Points – Can  You Save Too Much for Retirement?

  • Replacing Your Income After Retirement
  • Looking at Income Spending by Retirees in Surveys from and Morningstar
  • When Is the Risk of Being Overfunded for Your Goals for Retirement and Why Should You Need It?
  • 13 Minutes to Read | 23 Minutes to Watch

Happy Fourth of July Eve!

Happy Fourth of July Eve everyone! We hope that you’re having a wonderful time celebrating with your friends and family. As long as you’re being safe, it’s hard to have too much fun celebrating the Fourth of July, but here’s something to think about—can you save too much for retirement?

When it comes to saving for retirement, we often hear about the importance of building a substantial nest egg. So, Dean Barber and Bud Kasper explored the concept of “saving too much” and its potential impact on your financial future on America’s Wealth Management Show. They’re going to help us examine the trade-offs of excessive saving, such as limiting your current lifestyle and missing out on life’s experiences. They’ll also discuss strategies to strike the right balance between saving for retirement and enjoying the present.

Finding Financial Independence

A lot of people think that there’s no such thing as too much money. But do you think you could ever have too much money? If you ask Dean that, he thinks there is a point of excess. But before he could think too much more about it, he started to think about financial independence.

“It’s interesting to talk about financial freedom as we celebrate the independence of the United States of America on the Fourth of July. I think of financial independence as the ability to know that you’re waking up every morning and you’re doing the things that you’re doing because it’s what you really want to do. And it’s no longer about a paycheck. Because you’ve saved enough to allow your money to work for you and deliver the income that you need without having to worry.” – Dean Barber

Setting Up a Spending Plan for Retirement

When our CFP® Professionals take people through the retirement planning process, they want to know how you think and feel about money. As you think about if you can save too much for retirement and about how you feel about money, you need to think about setting up a spending plan for retirement.

A spending plan can look at replacing cars, new appliances, a new roof, painting the house, helping with grandkids with college—the list can go and on. It’s your spending plan, so it needs to look at the costs of your needs, wants, and wishes. All those expenses are important, but you don’t get asked to think about or input the costs of those expenses with most online retirement calculators. If you’re working with a CFP® Professional, they have a fiduciary standard to uphold—meaning that they’re obligated to put your needs, wants, and wishes ahead of their own.

“What we’re really talking about is a sense of well-being. If you have that sense of well-being, then you know that you can spend without worry because you’ve identified what that real number is. But go back to this question. Can you save too much for retirement? Is it possible to save too much? Yes, you can because I’ve seen it many times. In fact, I’ve seen it more often than people not having enough saved for retirement.” – Dean Barber

Saving for Retirement Isn’t Easy

Saving for retirement does require being disciplined. And, obviously, some hard work as well. Unfortunately, there are a lot of people who don’t want to do either of those. it’s a sad reality for far too many Americans because we live in an instant gratification, drive-thru mentality society where everybody wants everything to be easy.

“They want it fast and don’t want to have to pay for anything. And it’s just this whole idea that you should be entitled to something because you live in the United States. Well, you’re entitled to something. You’re entitled to go out and do what you want to do if you work harder than everybody else. If you do that, great things will happen for you. You’ll make good money and then you can save. But the point is, when have you saved enough and can you save too much for retirement?” – Dean Barber

Finding Financial Independence with a Financial Plan

Some of the saddest examples that Dean seen is when someone will save a lot but when their spouse wants to go on some vacations, they’ll say they can’t afford it and need to save more for retirement. The problem typically arises when the couple has a certain number in mind that they think they need to retire and false narratives. Instead, the couple needs a financial plan that will show them if they can truly afford to go on vacations or make other big purchases while trying to get to or through retirement.

“A good, solid plan that shows whether you’re financially independent or not. Financial independence doesn’t come from having a dollar amount. It comes from knowing that you have enough to generate the income to deliver the lifestyle that you want for the rest of your life and to keep up with inflation.” – Dean Barber

Gaining Confidence from Your Financial Plan

As we pose the question, “Can you save too much for retirement?” let’s look at an example of saving too much. And this is something that Dean and Bud have seen happen multiple times. In this example, a couple will go through the retirement planning process, and an advisor will identify that if you wanted to stop working tomorrow, you could.

What happens is that at least one of the spouses of the couple in this example will say that they’re at the height of my career and enjoy what they’re doing right now. They have in their mind that they want to work for another three to five years.

Well, if that’s the case, just know that you don’t have to wait until three to five years to start enjoying some of what you’re making or what you have saved. Oftentimes in this general example, Dean will encourage the couple to stop saving since they’ve already saved enough.

“Take what you were saving and start taking some vacations and doing the things that you want to do today. Start helping your kids and/or grandkids or giving to charities if you want to do that. Gaining the confidence that you can do that only comes from the overarching plan.” – Dean Barber

How Are You Saving for Retirement?

Whether you’re not sure you’re saving enough for retirement or you’re asking if you can save too much for retirement, you need to understand where you’re saving to. A lot of people will mainly save to their 401(k). If that’s the case, that question of where you’re saving still stands. Are you saving to the traditional side or Roth side of it? If you know Bud, he’s not bashful in telling you why you should utilize the Roth, whether it’s through contributions or conversions.

“Maybe the only reason you save to the 401(k) is for the match. If you’ve saved so much, you can’t leave money on the table, so you put as much money in to get the match, but you don’t have to go past that point. If you do the Roth, that’s a whole different thing because you get tax-free income as opposed to taxable income. So, I allow a little latitude there for the super savers, the over savers. If you’re going to do it, do it smart.” – Bud Kasper

The Top Three Reasons Why People Don’t Spend Enough Money

As Dean said, he usually sees people not spending enough (saving too much) rather than not saving enough for retirement. So, he’s going to share the top three reasons why people don’t spend enough money.

  1. They have a fear of running out of money.
  2. Their spouse won’t let them.
  3. The lack of clarity on how much is OK to spend.

“That third reason is a big reason why people spend too little. And it goes back to that fear of running out. Those are the reasons why I believe people spend too little.” – Dean Barber

The Top Three Reasons Why People Spend Too Much

Now, on the flip side of that, Bud is going to share the top three reasons why people spend too much.

  1. They don’t believe they are going to live to age 80.
  2. They don’t have the discipline with their spending because they didn’t do enough in terms of saving.
  3. Family interference.

“What I mean by family interference is grandchildren’s college or a son or daughter that needs help with a down payment on a new house. Things like that. I’ve told the story many times over the years that I had actually a client that totally bankrupted herself because of her daughter’s college needs from that perspective.” – Bud Kasper

Getting Clarity on How Much You Need to Retire … Can You Save Too Much for Retirement?

Let’s talk about how people can get the clarity they often seek when they’re saving for retirement. There is a huge mental shift from working to non-working life.

When you’re working, you know how much is coming into your bank account every month. You know how much is going into your 401(k). You know that taxes have already been taken out with what goes into your bank account. And you know how much is going to go into savings. You have a very clear picture of your present financial situation and it’s all kind of automatic.

Once you shift into that phase of life of non-working, it’s very difficult to get out of the mindset of saving. It’s also very difficult to arrive at that sense of well-being where you know for sure what’s the right amount that you can spend.

Developing a Spending Plan with a Financial Salesperson vs. a CFP® Professional

When you talk about spending, you’re obviously spending on different things. You have your necessities—utility bills, meals, entertainment, and other things that you do on a normal basis. Dean has seen too many scenarios where people will say they need like $5,000 a month, just as an example. And they’ll work with somebody that calls themselves a financial planner but really is more of a financial salesperson and just focuses on investments.

They’ll do a quick calculation for needing $5,000 a month where they get $2,500 a month from Social Security, $1,500 on their spouse’s Social Security, and they’ll have $1 million saved. With that simple calculation, they’ll have their $5,000 a month they can spend. But what did they miss?

The Many Issues with an Oversimplified Plan

They didn’t think about health care and how quickly health care is inflating. What about traveling? Does that $5,000 a month include the trips that you want to take? Does it include the gifts that you want to give on birthdays and Christmas? And then there are some of the big purchases we mentioned earlier like replacing a car, home repairs, etc. Those are just a few issues with a simplistic type of plan.

So, let’s say that couple has $5,000 a month to spend and wants to go on a trip. Well, how much is that going to cost? Maybe it’s about $15,000 and they take the trip. But then they wind up a several years into retirement and have this moment of panic when they think they’re running out of money.

“They didn’t have the clarity because they didn’t take the time initially to set up the plan. And then they didn’t take the time each year to thoroughly review the plan and do all the what-if scenarios that we do for our clients to make sure that the things that are unknown and can happen don’t disrupt the ability to keep doing the things that you want to do.” – Dean Barber

Do You Want to Replicate Your Salary in Retirement as You’re Thinking About Spending in Retirement?

You can’t move forward in retirement without having a full-fledged financial plan. It’s all about taking the elements of the plan individually and then identifying the intention of your money to come up with how much you need.

“It would be easy to say, ‘I want to replicate the salary that I had when I was working.’ Well, that’s doable. That’s a viable way of looking at this. But what has changed? Well, you’re not driving to work every day. You’re probably not spending money at the restaurant for the lunches that you have. It’s just little things that kind of add up during that sequence. It provides you an understanding how things change in retirement.” – Bud Kasper

Is Retiring with Debt OK?

One of Bud’s clients that he met with recently has really prioritized saving. But she’s saving so much that Bud is really trying to make sure that she’s not forgoing things in retirement because of how much she’s saving. However, she still has a mortgage that has $40,000 left on it and she has a 3% rate.

Bud always emphasizes the liberation of owning your house and how good it feels. But if she pays that off at 3%, where else could she put that money that she maybe could’ve gotten 6% on? It would be to her advantage to not pay off that mortgage for that time frame because of the low rate.

“This is when it comes down to personal decisions. But at least we vetted so that we know that the options of that situation can be calculated.” – Bud Kasper

Do You Want to Leave a Big Legacy?

So, Bud understands why his client doesn’t want to rush paying off her mortgage. But he still doesn’t want her to get in the mindset of needing to constantly save to the point where she’s going to forgo doing things that she enjoys doing.

“Let me put it this way, she’s so responsible to her future that she continues to drive down this road. At some point, though, as I’ve told her before, she needs to relax and have some fun with her friends and her husband. It’s not like we’re going to be on this planet forever.” – Bud Kasper

And to Bud’s last point, you can’t take your money with you after you pass on. If you’re concerned about leaving a big legacy or you want to leave a bundle of money to your favorite charity, then there may not be such a thing as saving too much. As Bud said, It’s personal preference. Still, Bud and Dean have seen many situations where people have saved too much for retirement.

How Do You Give Yourself Permission to Spend?

One of the saddest stories that Dean has ever witnessed involved a gentleman that had a kidney replacement. He had had a failing kidney and his wife had breast cancer. He was scared to spend in retirement and was still saving for her benefit. However, they had so much money that there was no way they could ever run out. And they didn’t have any kids.

“He was scared to spend. Once we validated how much he wanted to spend through the financial planning process, we got him to spend a little bit. But unfortunately, he only lived another five or six years. Now, his wife is here with all this money and still at an age where she can live another 15 or 20 years. There’s no way she’ll ever spend it.” – Dean Barber

So, if you’re someone who says “absolutely not” when asked if you can save too much for retirement, how are you going to give yourself permission to spend in retirement? Well, think of your financial plan as a permission slip to spend in retirement. It can help provide you more confidence, freedom, and time in retirement.

Generational Wealth

Bud is thankful that he has several clients who have created generational wealth. Their children have gone to college, had very successful careers, and now need to be asking themselves if they can save too much for retirement. But let’s still focus on this from the clients’ perspective for a minute.

“Sometimes I think that is the greatest relief for retirees. They’ve been successful with so many things of their lives, including their savings. And now their children are successful as well. Therefore, that leaves them with the ability to give more to charity and whatever other wishes that they have.” – Bud Kasper

A lot of times if you ask their adult children what they’re expecting as an inheritance from their parents, they would rather that they not get much of an inheritance and that their parents enjoy what they saved and worked hard for all their lives. Still, Dean and Bud has seen situations where the parents struggle with passing up on doing the things they love because they’re focused on leaving a legacy—even if their children don’t need or want their money.

Having Family Meetings

Whether it be about finances, goals, or whatever it may be, it can be hard for parents and adult children (and grandchildren) to all get on the same page. That’s why Dean and Bud are both big advocates of having family meetings to ensure that everyone is aware of each family member’s needs, wants, and wishes. Ideally, these family meetings will take place in person, but thanks to the rapid advancements in technology in recent years, you can always have someone join virtually.

For example, let’s say you and your spouse want to leave a legacy that could end up being around $2 million. Rather than being secretive about your money, why wouldn’t you want to be transparent to your children, grandchildren, or other loved ones who it will be passed down to? That’s a big money event that will happen in your beneficiaries’ futures that they need to plan for. If you’re not having those discussions with your beneficiaries, that can cause them to over save because they’re not clear on what you have planned for them as an inheritance.

“I had that scenario happen last month. The one surviving adult son and his spouse inherited way more money than they ever thought they were going to have it. They had been so focused on saving and now they’re wondering what they’re going to do with all of it. Well, go enjoy your life.” – Dean Barber

The Main Takeaway When It Comes to Whether You Can Save Too Much for Retirement

If you take anything away from this discussion about whether you can save too much for retirement, it should be the importance of having a financial plan and developing it with CFP® Professional. This isn’t a simple process.

“Most of time, it takes an hour, maybe two hours of discovery when meeting with a CFP® Professional for them to truly understanding what you want the rest of your life to look like. What are the resources? What are your tax implications? How do you and your spouse plan to claim Social Security? What about the potential of a long-term care stay? There are all kinds of things that you need to take into consideration.” – Dean Barber

The Journey to Financial Independence

If you can gain that confidence from attaining financial independence, the freedom that you get from knowing that you don’t have to worry about money anymore is incredible. Whether you continue to keep working or not is up to you. But it does change the way that you think about life in general.

So, are you in a position where you think you might be saving too much for retirement? Or do you think that you’re not saving enough? Either way, the only way to find out is by building a financial plan. But how do you get started? We have a few ways to help with that.

Building YOUR Financial Plan

We listed several things (and could list several more things) that retirement calculators can miss. Well, our industry-leading financial planning tool doesn’t miss those things and allows you to build a plan that’s customized for you to accomplish your retirement goals. You can begin building your plan from the comfort of your own home—and at no cost or obligation—by clicking the “Start Planning” button below.

Save Too Much for Retirement


We also hope that this article has helped you understand how critical it is to work with a CFP® Professional. If you’ve already started to build a financial plan, that’s great! But you don’t want to miss anything that could prevent you from not living life to the fullest in retirement. That’s where our CFP® Professionals and other financial professionals—CPAs, estate planning specialists, risk management specialists, investment management team, and others—can help.

If you’re wondering if you can possibly save too much for retirement or have other questions about retirement planning, let us know. You can schedule a 20-minute “ask anything” session or complimentary consultation with one of our CFP® Professionals by clicking here. We can meet with you in person, by phone, or virtually—it’s whatever is easiest for you.

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The views expressed represent the opinion of Modern Wealth Management an SEC Registered Investment Adviser. Information provided is for illustrative purposes only and does not constitute investment, tax, or legal advice. Modern Wealth Management does not accept any liability for the use of the information discussed. Consult with a qualified financial, legal, or tax professional prior to taking any action.