Are You Saving TOO MUCH For Retirement?

Can you actually save too much for retirement? It sounds like a strange problem to have, but it’s more common than you think! In this episode, we discuss signs you're over-saving and how an excessive focus on your future can rob you of joy today. We’ll talk about the importance of knowing what you're saving for, frugality vs. stinginess, and when you might need to adjust your savings plan. Plus, we’ll walk through how to find your actual retirement number (spoiler: it’s not one-size-fits-all) and how to align your money with your values. Tune in!

For the full transcript, show notes, and resources, visit thewealthmindsetshow.com/s2e12

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Chapters

• 2:48 Signs You Might Be Saving More Than You Need To
• 3:39 The Importance of Knowing What You're Saving For
• 5:03 How Much is Enough? Finding Your Retirement Number
• 7:48 What Are You Missing Out on by Over-Saving
• 10:45 Helping Others in Retirement Vs. Blessing Them Now
• 16:21 Is It Time to Talk with a Life Coach?
• 17:01 When Should I Adjust My Retirement Savings Plan?

Transcript

You're listening to The Wealth Mindset Show, where Hixon Zuercher Capital Management's team of finance professionals, portfolio managers, and a life coach come together to tackle complex topics in finance and retirement planning, so you don't have to. From investment strategies and wealth management to tax planning, retirement income, and aligning your money with your values and purpose, The Wealth Mindset Show offers the tools to thrive.

Austin Wilson:

All right. Hey, hey. Welcome to The Wealth Mindset Show where our Hixon Zuercher team will have conversations on managing wealth, navigating retirement, and making smart decisions for a secure, meaningful future. I'm Austin Wilson, Director of Investments at Hixon Zuercher Capital Management.

Josh Robb:

I'm Josh Robb, Director of Wealth Management at Hixon Zuercher Capital Management, and today we are joined by Jordan Shaw-

Austin Wilson:

Jordan Shaw.

Josh Robb:

Financial advisor here at our firm, and he's going to be helping us with the topic, can you save too much for retirement?

Austin Wilson:

Now this seems like an interesting topic to discuss because off the top of my head, I'm just saying, I don't know, probably not, but maybe. So, we're going to have to figure that out because we don't think we talk about this aspect too much, but it can have really a lot of implications on your quality of life now and in the future. So, let's break down a couple things. First topic, guys, there are some downsides to over-saving. So, what happens to you when saving becomes too much of a focus, especially in your working career?

Josh Robb:

Yeah, because most people ask, "How much do I need to save?" Or "Do I have enough?" But really this conversation doesn't come up much, but it is important and we're going to talk about it, but the one is the trade-off, and this is something we talk a lot about, is anytime you're saving it is a trade-off, you're taking short-term opportunities and trading it for a long-term opportunity or goal. So, saving in general, you're always trading off. So, at some point that trade-off is no longer worth it. And that's the dilemma, is the sacrifice between that long-term security of having enough and missed opportunities of right now.

Austin Wilson:

And then I guess one thing to think about is that when you're giving that up now, you're often choosing, like you said, you're delaying that gratification, but that frugality can limit your present-day enjoyment. So maybe you're not going to go on a vacation this year or as big of one or drive as fancy of a car or big of a house or help your kids with XYZ. There's a lot of different things you can choose not to do today, and that's just something to keep in your head because maybe you don't have to not do some of those things. Maybe you can do more. And that really goes back to knowing your plan, right?

Josh Robb:

Yes, yes.

Jordan Shaw:

Yeah, exactly. You need to know what is the goal behind what we're doing. The question, am I saving enough? It's so general that okay, there's retirement.

Josh Robb:

I could say maybe, I could say maybe.

Austin Wilson:

You can say maybe.

Josh Robb:

Every time, that question...

Austin Wilson:

I know it's going to come up.

Jordan Shaw:

Every time.

Austin Wilson:

It depends.

Jordan Shaw:

Of course. But there needs to be something specific.

[2:48] - Signs You Might Be Saving More Than You Need To

Austin Wilson:

Oh, yeah. Totally. So, what are some signs maybe when you're talking to a client that they may be saving more than they need?

Josh Robb:

I think some of the signs really come down, you talked about frugal. And there's frugal, and then there's stingy and I think-

Austin Wilson:

Or cheap.

Josh Robb:

Cheap. And I think if you hear or see in conversations, they're kind of borderline or crossing that line, that's maybe some signs you're saving too much. If everything revolves around pinching pennies and getting the most tucked away, if there's no reason for that, if you're not like, "Oh man, I'm way behind. I'm playing catch up. I got late start." I mean, there's reasons why you may have to be a little more diligent in savings, but if it's just saving to save, if you don't have the goal, you mentioned it, if you don't have a reason and goal, that's probably a sign maybe you could be doing other things with that money.

[3:39] - The Importance of Knowing What You're Saving For

Austin Wilson:

So, Jordan, how do you go about talking to a client about establishing those goals? Getting on the same page of what the plan is for what you're saving for?

Jordan Shaw:

Yeah. Well first it's a conversation at the beginning of a relationship with someone for sure, but it's actually something that develops over time. Once you see the behaviors of someone with their finances, you can kind of tell are they someone who's going to be intentional about chasing goals in the first place before even figuring out what those goals are. People sometimes don't even know what their goals are, but once you figure out what their behaviors are like, if they're saving or if they're spending too much, then you can say, "Okay, here's some things that seem to be important to you. Does that line up with what your behaviors are like?" And then if that's true, they can work on that and then actually make progress towards that versus, "Just do this step one, two, three, and you'll be fine." If the behavior's not there, it doesn't work out.

Josh Robb:

If one of their goals is spending more time with family and they're saving so that they do that in retirement, having that conversation, if that's your actual top priority, what about doing some of those things now and adjusting how much is put towards the future enjoyment of family and bringing it into the now enjoyment of family?

[5:03] - How Much is Enough? Finding Your Retirement Number

Austin Wilson:

I think that a lot of people often say that how you allocate your money today really shows what is important to you and I think that that's one example of that. So I guess what we're trying to say here is that savings are really just a tool, right? The goal is not to save, but the savings are there to meet the goals that you have in your life, not the other way around here. So that brings us kind of to our next topic is what is the magic number? And Josh, I know what you're going to say. So what's the magic number? Do you need one, two, three, five million dollars for retirement or is there just some generic number that people talk about and how do you guys calculate that?

Josh Robb:

Yeah, there is no real one number. Just if you take lifestyle or living expenses from one side of the United States to the other, there's different costs of living, so you need different amounts just to have the same lifestyle over in California versus Ohio versus Florida. There's just different costs. So there is no one number for everybody, but the end result is how much do I need on a weekly or monthly basis to cover all my costs, food, housing, utilities, all that stuff, and have some leftover for the enjoyment of what I want to do? You take that and you take your monthly costs, make it an annual cost, and then you take that, and then you can back into how much do I need lump sum to provide that through the rest of my life?

Austin Wilson:

That's the gap.

Josh Robb:

It's the sustainable withdrawal. And so there's rules of thumb. There's kind of a 4% withdrawal rate that we have in our industry. It's kind of saying if you could take 4% out of your portfolio sustainable for 30 years, historically, there's a lot of, we've talked about in episodes of maybe it's a different, higher, lower than 4%, but the end result is that's an easy way you could divide backwards to get to that lump sum. So if you say, I need $60,000 a year, you could back into how much do I need to accumulate for 30 years of that withdrawal? And you can figure that out, but there's no one number.

Austin Wilson:

I think understanding your spending needs is probably going to be different in retirement too. So maybe you don't have a mortgage, maybe your fixed costs are a little bit lower here and there, understanding your real needs and backing into that number. So Jordan, how do you sit down with a client and say, "I want to build a plan based on your lifestyle, and what do you want that to look like or what can that look like?" How is that different between your dream retirement or what's practical?

Jordan Shaw:

Yeah. Well, once we know what the big goals are, we can back into what they want to be spending in retirement. We can add to that, oh, you want a second home or you want to go on a big vacation every five years or something like that. But another key component there is how willing are you to take on enough risk in your portfolio to allow that number and that withdrawal rate to sustain you, because you might have the same number for two different people, but if person A is more invested in bonds or heaven forbid all cash or something like that, it's not going to work out for 30 plus years as someone who's more invested in the market. So that's another big piece there that you talk through and you make sure that people understand you need to be willing to allow for some growth in that portfolio when you want to hit all these big goals in retirement.

[7:48] - What Are You Missing Out on by Over-Saving

Austin Wilson:

Yeah. Let's talk about the opportunity cost. And opportunity cost is something that you're giving up, it's potential giving up for future gain is what we talked about earlier. So there are things we talked about you missing out on if you over save today. So, let's talk about some of those ideas. What good and what challenges can there be when you delay some spending today for the future?

Josh Robb:

And the biggest one is spending now gives you immediate results, whether it's for me or for someone else. If I spend on a vacation for the family, we all get immediate enjoyment out of that. If I donate to a cause, they get immediate enjoyment from that donation. If I postpone that, there's still going to be some enjoyment with somebody down the road, but it's a delay. And so that opportunity cost is just again, weighing the thing of, okay, I have the opportunity to travel with my kids now versus when they're older. Which one will they be more appreciative? Let's take Disney World for example. Maybe a five to 8-year-old may enjoy Disney World a little more than a 20-year-old who says, "Oh, that was fun back when I liked Disney princesses. And now that I'm all grown up, no."

Austin Wilson:

There are some Disney freaks out there.

Josh Robb:

There are. And then you got all the fun stuff like Marvel and Star Wars and stuff. So you can go anytime and enjoy it, but there's periods of time. So I look at my daughters, there were times where they were more into Disney princesses than other. And so if I say all my savings is going to future enjoyment, you can miss out on an opportunity of making memories and doing those things today.

Jordan Shaw:

If you're concerned about spending too much and you're trying to save, you're always spending something. You might not be spending money, but you're spending time. And if you're not spending your time in a way that is adding to the enjoyment of your life and you're hitting other, maybe not financial, but other goals in your life, relational goals, just time goals that you want to look back and say, "Okay, that was a year well spent or a decade well spent," you might not be looking at the financial side. You might be looking at what your time and sometimes you need to spend money to create those experiences and it's worth it.

Josh Robb:

Or you're working so hard to save more that your health and your relationships deteriorate because you don't have the time or energy to take care of those. Whether it's you personal health or the relationships with family and friends is, "I'm constantly working. All I do is work so that I can save more for the future." I think of those, the F.I.R.E. movement, the financial independent, retire early. They're saving 40-50% of their income, and a lot of times part of their success is driven on working two, three, four jobs so you get income to put away so you can be done. Well, I don't know, what's the long-term impact on, in a sense, neglecting your health for two decades so that you can retire and be done at 40-

Austin Wilson:

A 50-year retirement.

Josh Robb:

... but yet you're completely worn out at that point. There's always trade-offs again on what you're doing.

[10:45] - Helping Others in Retirement Vs. Blessing Them Now

Austin Wilson:

So, a lot of people that we talk to are focused on leaving a legacy with their finances, thinking ahead for the next generations, leaving some money to family is usually what happens there or other causes or whatever. So, what are some pros and cons of thinking about maybe blessing and helping those people in your family now by giving them up to your taxable, tax-free gift limits or whatever, maybe, or holding onto that, letting that money grow and doing it in the future?

Josh Robb:

And again, it's always a trade-off. There may be opportunities to bless others now, which you don't have, but there's always a trade-off because the unknowns is what if there's a reason I may need that later and I've already given it? And so that's one of the harder ones is if you're very passionate about something, then by all means get involved and start contributing now. If you are just looking at giving money away because that's what you heard or thought you should do, maybe there's a better approach to it, I don't know. But when it comes to blessing others and with your kids or whoever, there's estate planning, there's a lot of reasons why you maybe shift money around. But again, you got to do it for a purpose. You got to have a plan and have a reason for that.

Austin Wilson:

I also think that needs are different too. So a couple thousand dollars when someone is a young family just getting started is more valuable to them than 20, 30. $50,000 is 20-30 years down the road.

Josh Robb:

When they're 60 or 70 years old themselves.

Austin Wilson:

Right. So I think that that's something to think about too, is when could a little bit go a long way in terms of helping someone in my family or whatever.

Have you ever thought about how your financial choices reflect what truly matters to you? Hixon Zuercher Capital Management, we believe that integrating your values and dreams with your financial future is key to achieving peace of mind and confidence. When you engage in deep conversations with us, you'll start to see how your money can support the things that matter the most in your life. Our holistic approach means that your financial plan is more than just numbers. It's a personalized blueprint that evolves with you. You'll have a dedicated team of professionals tailored to your unique needs, all focused on crafting an investment portfolio designed to help you achieve your specific goals. Plus our on-staff Retirement Life coach offers guidance to empower you toward a fulfilling retirement that goes beyond just financial security.

Ready to transform your relationship with money? Join us at hzcapital.com and let's embark on this journey together. Now, back to the show.

[13:13] - A Purpose-Driven Approach to Retirement Saving

Austin Wilson:

Let's talk about next, a purpose-driven approach to retirement savings. So let's think about what if we shifted our focus from the accumulation phase and we're trying to accumulate, accumulate, accumulate, save, save, save. It's more of an intentional living way of doing things here. So, talk a little bit about how that impacts your saving for retirement needs, your bucket list goals, and people that you need to keep in the loop as you're making these plans.

Jordan Shaw:

I like this question because a lot of times what we see is people who are so intentional about saving, saving, saving... They're worried about not having enough. Like we said at the beginning, it is so difficult to transition once you hit that where you do have enough and now you need to start drawing from your portfolio and spending the money to support your lifestyle. It's so hard to change that mentality in retirement. So if you can work on that earlier, then it makes it so much easier in that transition where you're saying, "Okay, I am being intentional about what I'm saving, but it has a purpose like we've talked about, but I'm also being able to let myself loose a little bit here with my finances to do some of those things now and have some of that mentality about it's okay to live a certain way, to have a lifestyle here, to give money away when I see a need or to do something fun when I have a desire to do that with my family or whatever it is." So I think it is something that's important to start early.

Josh Robb:

And unfortunately, I've been involved with and know of many situations where that long-term plan never paid off or played out the way they wanted because of maybe a change in health or an early death. And that's, to me is the biggest thing of all this, is saving too much or postponing everything for our future, which is unknown, right?

Austin Wilson:

Oh, yeah. Oh, yeah.

Josh Robb:

We don't know how long we're going to be here on earth. And so I'm a big proponent now of that moderation between saving and preparing and being a good steward for your family in the future, but also making sure you're enjoying and doing those things now because there is no future and there's just story after story that is just sad of people who had all these plans and then something changes and they can't. And what I hear is, "I wish I would've done more while we were younger or while we were working when we had the ability." And that's to me, one of the saddest things is just that they didn't take those opportunities. They didn't take that trade off of time versus the savings. And there's more to life than just saving for a future retirement that you don't even know what it'll be like. So I definitely think there's a balance.

Austin Wilson:

I think that that's something that you don't often think about until it's too late. You just think, "Oh, I've got 60 years ahead of me," or, "50 years ahead of me," or "40 years ahead of me," and things change on a dime. So, I think that's something to always keep in mind. Yeah, we don't know the time. Josh, talk a little bit about how working with an expert in determining the non-financial side of things and that impact may help you with your goals.

[16:21] - Is It Time to Talk with a Life Coach?

Josh Robb:

Yeah, it's twofold, right? Jordan has mentioned it like you need a financial advisor or someone to help you build a plan on how much you need to save, and you could save above that, which just enhances your retirement or speeds up the process, but you also need to be talking with someone from the non-financial side. And we talked about a life coach. We've had Scott Miller here on our podcast with us, someone who can help you balance and judge those values and purpose side to say, what could you be doing today versus postponing till later? And some of it costs money and so trade-off of savings versus utilizing some of that for today that gives you sense more purpose in life.

[17:01] - When Should I Adjust My Retirement Savings Plan?

Austin Wilson:

So, here's a question putting you both on the spot. You're my financial advisor experts in my life, guys. So, when do you adjust the plan, right? How do you know it is time to say, "Okay, I did a good job, I was really aggressive at my saving. Now I can kind of pull back and just live by it a little bit"?

Josh Robb:

When you have a plan, you don't have to wait until the end to see if you got there. You can know if you're on track. And if I'm on track, I can make that kind of let off the gas a little bit, make sure I'm still doing what I need to do, but I don't have to go beyond if I caught back up to where I need to be. But again, there's always the unknown. So it's kind of this back and forth of how am I doing now? What do I see coming? How consistent is my job? Am I worried about cashflow changes? All those things. But in general, if you're hitting your goals, that's a good indicator. You can probably make those adjustments.

Austin Wilson:

What do you think?

Jordan Shaw:

Yeah, the tools are there for a reason to tell you if you're on track with working with an advisor can help you see, "Okay, am I doing everything that I need to?" There is value there. And we're not saying here to, "Spend, spend, spend, you don't need to say for retirement." Obviously, you 100% do and most people would fall on the side of you need to save a little bit more.

But the tools are there. And once you realize, "Okay, I am constantly thinking to myself, I just feel like sacrifice, sacrifice, sacrifice." Maybe you don't have to sacrifice all the time. If you're constantly feeling like you're not doing enough in your life to add value, all you're doing is saving money and it really looks like you're on track or maybe even better than on track, then that's definitely a conversation to have and start making some adjustments here, and it also matters how far out from retirement are you. Because the younger you are, it's more important to establish those behaviors of saving. But if you've been doing that for a long time and retirement's not too far away, or it's maybe a decade or so away, you might have more freedom than you realize.

Josh Robb:

When you find that you're not as excited about that future, but you're looking for those things now you're saying, "Oh man, I wish I would've done that." If you're starting to say those things like, "Man, my kids were growing fast, I wish we would've." That's the time to start reevaluating, and say, "Okay, am I really focused on the right priorities?" If you're starting, you don't want regrets. You don't want to look back and say, "Oh, man, I was so focused on saving. Now it's just me sitting here with more money than I need, and I wish I would've used some of it." Right? So that's when you can start thinking about adjusting if you're starting to have those regrets or kind of like, "Oh, man, I'm missing those opportunities."

Austin Wilson:

And I think that that's something that, especially if you're in a career and in a world where you don't hate going to work every day, you maybe can be okay working a little longer and not being as aggressive with your saving and enjoy more of what you want to do earlier. It's just there are pros and cons to both as we've laid out for the last 20 minutes. But I think that that's something to keep your mind is it's okay to enjoy it. We're just going to reiterate and reiterate and reiterate, you don't know how long you got. So spend the time with your loved ones and do things that you enjoy as much as you can realistically.

Josh Robb:

While still saving.

Austin Wilson:

Got to be saving too. But yeah, that is kind of what we are thinking about, talking about today. Thanks for listening. Thanks, Jordan for keeping Josh and I up.

Josh Robb:

I will say, as we're wrapping up, today, one of the advisors had a conversation and the client said, "Tomorrow isn't promised." That was their words because they had a health issue in the family and it was eye-opening where they are now considering adjusting their plans to experience more in the now. And it took unfortunately, a pretty serious event to recalibrate that thought. But I'm excited to see where they go from here because now they have a different perspective. But hopefully for people won't take something like that to say, "Am I just focused on one goal when there's other ones I may be even more satisfied if I include those in my plan?"

Austin Wilson:

So this is a great reminder to talk to your financial advisor to see where you are on your plan because maybe you've been over-saving, which would be a great, like we said, most people aren't in this situation, but that'd be a great position to be in, and maybe you can start enjoying what you work for with your family and loved ones. But yeah, if you found value in our conversation, don't forget to subscribe to this show, The Wealth Mindset Show on your favorite podcast player. We're everywhere. And then you can visit us at thewealthmindsetshow.com for more resources. If you're ready to invest with us or you think that we might be a good fit as your financial advisor, go ahead and check us out at Hzcapital.com. We'd love for you to take a look there. And then don't forget, follow us on all social media platforms, we're pretty active there and a good way to keep in touch as well. So again, thanks Jordan for being here, and we'll catch up here real soon. Thanks.

Jordan Shaw:

Talk to you later.

Austin Wilson:

Bye.

Thank you for joining us at The Wealth Mindset Show where we tackle the complexities of finance and life planning to help you align your wealth with your values. We hope today's conversation provided value and clarity as you navigate your financial journey.

Your hosts work for Hixon Zuercher Capital Management and all opinions expressed by them or any podcast guest are solely their own and do not reflect the opinions of Hixon Zuercher Capital Management. This podcast is for informational purposes only and should not be relied upon for investment decisions. Clients of Hixon Zuercher Capital Management may maintain positions in the securities discussed in this podcast. There is no guarantee that statements, opinions, or forecasts provided herein will prove to be correct. Past performance may not be indicative of future results. Indices are not available for direct investment and any investor attempting to mimic index performance would incur fees and expenses that could reduce returns. Securities investing involves risks, including the potential loss of principle, and there is no assurance that any investment plan or strategy will be successful.