Signs that you are saving more than you need for retirement

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Conventional wisdom is to start saving early for retirement and be consistent with it. Against the background of inflation and financial worries, 90% of seniors say there is a retirement crisis in the country, according to a survey by the American Advisors Group, so there is cause for concern. But is there a point for some Americans when they’ve saved too much?

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“Many retirees find they want to retire but unfortunately don’t have enough money to retire,” said Ben Reid, GM of M1 Finance. “And since the cost of living will continue to rise in the future, investing too much for retirement is a problem worth having — rather than not having enough money for retirement.”

A new GOBankingRates survey found that a full 37% of Americans have not started saving for retirement, while 27% have saved $10,000 or less. Additionally, 15% have saved between $10,000 and $50,000; 8% have between $50,000 and $100,000; 9% have between $100,000 and $500.00; a paltry 4% have between $500,000 and $1 million; and just under 2% have more than 1 million

As a general rule of thumb, Fidelity recommends setting a goal of 15% of your pretax income each year, which includes any employer match, said Rita Assaf, vice president of retirement products at Fidelity Investments.

“The Fidelity guideline is to aim to save 10 times your early retirement income at age 67,” Assaf said. “To break this down by age, aim to save at least once your income by age 30, three times by 40, six times by 50 and eight times by 60. This guidance is based on an individual’s or household’s ability to cover estimated pension costs in a low market.”

But at the other end of the spectrum, is there such a thing as saving more than you need for retirement? And if so, where else should you put your money to work?

Experts suggest saving 25 times your annual expenses

According to some experts, a good way to determine whether you’ve saved enough for retirement is to aim for 25 times your annual expenses — a rule of thumb that assumes you’ll need to withdraw 4% of your savings annually to cover your expenses in pension without running out of money.

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“Of course, this is only a rough estimate, and the exact amount you’ll need depends on various factors, such as your lifestyle, health, inflation and other sources of income,” said Andrew Latham, Certified Financial Planner and Director of Content at . “If you’ve reached your retirement savings goal, congratulations! However, it’s important to remember that retirement planning isn’t just about saving money. Investing, estate planning and tax strategies can all play a role in ensuring a comfortable retirement.”

Latham added that it’s always better to err on the side of caution when it comes to retirement savings.

“While you may not need every penny you save,” he said, “having a surplus can give you added security and flexibility in your golden years.”

Where should early retirees be in terms of savings?

Some experts argue that there are other factors to consider when deciding when “too much is too much” for retirement, such as price fluctuations, inflation and the amount of personal and financial unknowns.

“I like to tell people to save enough money so that when they retire, they don’t have to cut back on their lifestyle,” said Howard Dvorkin, CPA and president of “Today, many people retire with debt that eats up their retirement income.”

Dvorkin said Gen Xers should pay off their homes, cars and credit cards before they retire, then max out their 401(k) plans and IRAs while making extra contributions if they can.

For millennials entering their prime earning years between the ages of 35-45, they need to make retirement a top priority. In the meantime, he recommends that Gen Z Americans open Roth IRAs as soon as they can.

“Compound interest is a magical thing, and even a few hundred dollars a month can grow when you start investing young,” Dvorkin said. “For example, a 22-year-old who puts away $100 a month and earns a healthy return of 10% compounded annually would have over $700,000 by the time they reach age 65. But if they started investing the same amount in a age 15, it would have almost doubled.”

Does location matter for pension savings?

While the cost of living varies greatly across the country – e.g. New York and the West Coast are notoriously more expensive than the Midwest and South — some experts argue that shouldn’t affect the thought process and commitment to saving for your future.

“Who can say if in 20 years the West Coast and New York will be as expensive as they are now with people moving in droves to the South and Midwest?” Dvorkin said. “As time goes on, the costs across the country can be leveled out to a greater extent.

“And I would not advise millennials or Gen Z to live on Social Security. Today it is a supplement to retirement income, not a replacement for it. Many people speculate that it may end at some point. My advice to all Americans is to save as much as you can, not carry unsecured debt and live to be happy not to buy things.”

If you feel comfortable with your retirement goals, then what?

While the amount you need to invest for retirement depends on goals, what you plan to spend and when you started, the contribution rate, which does not change based on location, and the amount you have saved should allow you to maintain your current lifestyle in retirement regardless of the expenses you may be used to.

But if you already hit that mark, you can still contribute more to retirement, allowing you to retire earlier or spend more on retirement. But that can come at the expense of other goals, said Kendall Meade, certified financial planner at SoFi.

“It’s important to sit down and think through what goals are most important to you, when they will occur and prioritize,” Meade said. “It may make sense to invest in a taxable account for other goals that may take place earlier. Retirement accounts cannot be accessed before age 59 1/2 without penalty; so for short-term goals — like a down payment — you want money that’s outside of those accounts and available to you now.”

Additionally, be sure to consider your entire financial picture. If you have high-interest debt, insufficient funds to cover regular expenses or insufficient cash to cover you in an emergency, you may want your retirement contributions to be lower, said Nilay Gandhi, senior wealth advisor at Vanguard.

Gandhi added that many of your non-retirement goals may have a shorter time horizon, such as saving to buy a home or planning a wedding.

“If you’re already contributing 12% to 15% of your income and are close to or meet the 401(k), 403b or Roth IRA contribution limits,” Gandhi said, “you can consider other investment vehicles that allow you to withdraw previously without penalty, such as brokerage accounts. These can help your money grow over time as opposed to sitting in a bank account.”

If you are comfortable with your retirement savings, it is important to prioritize other financial goals and needs. A good place to start is with your emergency fund, which should be able to cover the potentially stressful and expensive financial surprises life throws at you, Gandhi said.

Additional factors that should influence where you place your extra funds are your goals, time horizon and risk tolerance.

“Having too much cash on the sidelines will not allow you to grow your savings, but allocating funds to less liquid investment vehicles will not give you as much flexibility,” Gandhi said. “It may be a good idea to consider alternative cash products such as high-yield savings accounts, cash sweeps, money market funds, certificates of deposit and more, which can give you a higher return on your money while satisfying security and liquidity needs.”

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This article originally appeared on Signs You’re Saving More Than You Need for Retirement

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