3 Signs You're Saving Too Much for Retirement


The most common mistake people make with their retirement planning is not saving enough. For example, it’s generally recommended to have three times your annual salary saved for retirement by age 40. Most Americans fall well short of that. Among those aged 35 to 44, the median retirement savings is $45,000.

Even though it’s far less common, it’s also possible to go too far in the other direction. Some people focus so much on their retirement savings that they neglect other parts of their lives. If you save a large portion of your income for retirement, here are a few warning signs that you could be overdoing it.

1. You never take a vacation

Over-savers have a tendency to overwork themselves. After all, spending money on a vacation means not being able to save as much. If you don’t have paid time off, it also means going without income for as long as you’re gone. People who follow this logic often tell themselves that they’ll catch up on all those missed vacations once they retire.

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It’s rarely that easy to suddenly start traveling when you’re retired, if you haven’t done it at all until then. Even if it was, you can’t catch up on years of missed experiences. You won’t have the same opportunities at 60 as you did at 30 and 40. If you skip vacations with friends and family now, you may not be able to just do it later.

That’s why it’s important to have a healthy balance between work and time off. You can prepare for the future, while also enjoying yourself in the present. It could even keep you healthier. The Helsinki Businessmen Study found that shorter vacation times in midlife were tentatively associated with worse general health.

2. You obsess over the price of everything

It’s good to follow responsible spending habits. You definitely don’t want to spend more than you earn or waste money on purchases that you’ll never use. To ensure you’re not spending too much, it helps to set limits for yourself in big spending categories. For example, you may give yourself a limit of $600 a month on groceries.

However, people who save too much often take this to an extreme. They’re constantly comparison shopping and wondering whether they can really afford to spend an extra $5 or $10.

There are situations where you need to get strict about your spending. If you’re barely able to pay your bills, or you’re in heavy credit card debt, then it makes sense to cut back as much as possible. But if you’re doing well financially, it’s not worth your time to obsess over prices just to save a few dollars here and there.

3. You don’t go out with friends or family

Over-savers usually aren’t the life of the party. They often start declining invitations to go out just because they don’t want to spend any money.

Going out for dinners and drinks can certainly get expensive if you do it regularly. But once again, you can find a balance between having a social life and saving for retirement. Set aside money every month for activities with friends and family. That could be $200, $500, or any amount that works with your income and savings goals.

You don’t need to save every penny

Saving money for the future is an important part of managing your finances. It’s not all that’s important, though. Managing money well also means using it to have a good quality of life at every age.

So, how can you do this? Set reasonable savings goals and make sure you also set aside a portion of your income to use however you want. If you spend 60% of your income on bills, it’s unreasonable to save and invest the remaining 40%. You won’t have any money left over for yourself. Instead, you could use that other 40% like this:

  • 10% for savings goals (an emergency fund, a down payment on a home, etc.)
  • 15% for investments (through retirement accounts and brokerage accounts)
  • 15% as fun money (use this however you like, such as going out or buying video games)

It’s nice to see your savings rocket up, but it’s miserable to feel as if you can never spend any money. If you take a balanced approach, you’ll still be able to save, and you won’t have the stress that comes with trying to save too much.

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