Over-Saving for Retirement?

Trent over at The Simple Dollar wrote a recent post about Haruki:

A 27-year-old who is putting aside 15% of his paycheck into his 401K (with 5% employer match) and is maxing out his Roth IRA every year.

Trent says that this is ‘excessive.’

As Haruki’s situation is very close to mine (My 22% vs. his 15%, both with a 5% employer match), I respectfully disagree. I won’t be contributing this much forever. I can scale my contributions down when I finally get my condo, or have kids, or get married.  I already have a pretty good emergency/future fund set up.

But for now:

I like the challenge of living below my means, even when I don’t have to.  It’s a good habit to have in the future.  And I’d like to believe it makes me more resourceful and crafty with my money.  Think about it.

  • Living with less means less clutter and a more calming space.
  • Eating most of your meals in-house can be very healthy.
  • Learning new, tasty recipes can amp up your cooking skills and will be very popular for your future BBQ’s, potlucks, and holiday parties! Hehe.
  • Living crafty saves money and can be eco friendly.  Examples: Repurposing items for gifts, buying vintage, and DIY-ing, well, anything!

Someday I’ll scale down my retirement contributions.  For now, I’ll stick with it.  I’m content with my current ‘spendable income.’   I’d feel insanely guilty if I spent that money on other things.  I could buy a designer purse every other month!! Wow.  That would be amazing, but not very practical.

Saving like crazy when I have minimal expenses will (hopefully) free up my ‘future money’ later on in life.

EDIT:  (a few good comments from the post)

#66 Generation Y Investor @ 4:47 pm July 21st, 2009

Yes, saving 30% seems like a lot but as long as your balancing living life today and saving for tomorrow then it’s great.

Also, the main concept here is living below your means. Even if 30% to retirement at 27 is too much and he needs to address other goals down the line (ie car, vacation ect)… all he will need to do is direct some of the 30% to non-retirement savings.

-Gen Y Investor

#67 Kevin@OutOfYourRut @ 5:25 pm July 21st, 2009

Gen Y (46)–You’re making an important point here. We tend to focus on saving up enough money for retirement, but few of us will ever be able to retire if we don’t learn to live on less money.

The current generation of retirees is made up heavily of children of the Depression/World War 2 era–people for whom living frugally was a matter of course and not something done only when reaching retirement. For subsequent retirees, learning to live on less will be the important ‘other half’ of retirement planning, especially if investment returns aren’t as generous in the next few decades as we might expect them to be.

– E&I