5 Signs You’re Saving Big in Retirement

We are constantly bombarded with the message that we are not saving enough. The headlines scream about the “retirement crisis” and how millions of Americans can’t save. And it’s true—many people are underfunded.

But there is another group of people who have the opposite problem. They can be “super savers,” those who drain every account, track every penny, and panic when their value drops by half a percent.

It may sound silly to ask, “Am I saving too much?” It’s like asking if you’re too good or too happy. But money is a tool, not a high score. If you’re hoarding cash at the expense of your life, health, or sanity, you’ve crossed the line from smart to paranoid.

Here are five signs you may be overdoing it.

1. Obsessed with the ‘magic number’

We’ve all seen the benchmarks. For example, Fidelity suggests that you should have 10 times your annual income by age 67.

These rules of thumb are good starting points, but they are not physics. Projections based on averages. Research shows that most workers believe they need about $2 million to retire, but if you make $150,000 a year and live happily on $50,000, you don’t need millions to retire. You need enough to cover yours costsnot in lieu of a certain percentage of your salary.

If you’re grinding away at a job you hate punching a number in a spreadsheet, take a step back. Count what you actually spend, not what the average calculator says you should spend. You may find you passed the wire years ago.

2. You have high interest debts

This is the most common math error I see. I’ve met people who have $50,000 sitting in a low-yield savings account or conservative bond fund, yet carry a $5,000 balance on a credit card that charges 24% interest.

They told me they kept the cash “just to be safe.” That is not security; that costs emotional comfort.

If your money is earning 4% in the bank while your debt is costing you 20% or more, you are losing money every day. A “healthy” savings account is a sham if it’s built on a foundation of toxic debt. Pay off the cards with the highest interest first. The guaranteed “return” on paying off debt of 24% exceeds any stock market return you could possibly get.

One exception: When you’re about to lose your job, money is king. At worst, you’ll need cash to keep up with the car and house payments. Credit card debt is not secured by collateral.

3. You live a ‘retarded life’

This is the sad side of oversaving. He skips family vacations, drives unsafely, and refuses to buy a $4 latte because “that $4 could be $40 in thirty years.”

Although compound interest is powerful, it does not work in time. You can’t put together lost memories. I knew a helper who spent 40 years squeezing every penny, planning to leave the world at age 65. Two months after he retired, he suffered a stroke. He had millions in the bank, but he couldn’t spend the money the way he planned.

If you are miserable today in order to be happy in the uncertain future, your asset allocation is wrong. You need to invest in your current happiness as well.

4. You ignore the ‘tax torpedo’

If you put every spare dollar into a 401(k) or traditional IRA, you could be setting yourself up for a hefty tax bill.

The government wants to end it. Under current rules, you must begin taking Required Minimum Distributions (RMDs) from these accounts once you reach age 73. If you’ve saved a lot in tax-deferred accounts, those forced withdrawals may put you in a higher tax bracket than you are now. You may also incur higher Medicare premiums and higher taxes on your Social Security benefits.

It’s usually wise to keep things separate. Put some money into a Roth IRA (where you pay taxes now but the withdrawals are tax-free later) or a taxable brokerage account. Don’t just save blindly; save with strategies.

5. You’ve forgotten about Social Security

Despite the doom-and-goom headlines, Social Security will never reach $0. It is a government-backed, inflation-adjusted annuity that forms the backbone of many retirement plans.

Most super-savers who act like Social Security won’t be there. They try to save enough to cover 100% of their expenses in their portfolio alone. That is unnecessary difficulty.

For many people, Social Security benefits can replace a large portion of their income, especially if they wait until age 70 to claim. If your expenses are $6,000 per month and Social Security covers $3,500 of that, your portfolio only needs to generate $2,500 per month. That significantly lowers the “magic number” you need to hit.

An important point

Saving is a virtue, but hoarding is the answer to fear. The goal of financial independence is not to have a pile of money in the graveyard. It’s about having enough sleep and a good night’s sleep without staying awake because of the good life you’re living right now.