Stop saving for retirement?

[Jimmy Higgins]

I'm still in the first half of the 40s and remember the good ole college days of studying compound interest. Save early and that compounding will pay off. And all things being equal, I think I'm in good shape having embraced the math from the start.

So I was pondering the lesson of the saving early... can you stop saving or reduce it in your 50s (earlier?)?

Benefits

• instant raise
• money for other stuff like college and vacation

Cons

• no guarantee on rate of return over period of time
• obviously don't want to risk things
• can't control when the market is going to tank causing issues

Reducing in the 50s if things are aligned well almost seems like a thing to be done.

 

[rousseau]

To me it pretty much comes down to what your goal is. I see a lot of people just vaguely interested in investing, but without a well-defined long-term goal (i.e. what dollar value do I need in retirement). How close you are on track to meeting that goal basically dictates what you do, or can do.

 

[Jimmy Higgins]

The question is more about if you put the numbers into the coffer and they say, assuming a certain amount of growth, your planned retirement year, how long you want the money to last... if all of that is good, do you turn the contribution tap down or off at some point seeing the gain is going to diminish. Granted, if you are in your 50s, those dollars can be invested for 30 years still, and even 3% adds up to 2.4x after 30 years (staying ahead of inflation)!

 

[TV and credit cards]

Plenty of advisors out there with investment vehicles to save for retirement. They ever tell you when you should stop. It's hardly in their interest to do so. Of course, a person's debts, family obligations, and intentions in retirement are unique to the individual. My big thing was in realizing the value of my time. When is it time to start enjoying what you've been saving all this time? For me, that started ten years ago in my mid forties. And I was content, happy even, living a frugal existence. My only luxury is quality food. No Giant Eagle or Acme goes into the temple. But that's me. Some people want to leave a big lump of money to their kid. I know those people. Some are seemingly addicted to watching their savings grow and can't spend it if they wanted to, the brown-baggers.

What floors me is folks who are well in to their sixties of even seventies and still have their retirement savings in stocks or aggressive mutual funds. Again, it's all relative to what money you have and what you feel comfortable playing with. A thousand dollars has different value to different people. But I wonder if some think the stock market never goes down or won't at just the wrong time for them. Still others (many) never seem to get started. I've heard a couple people make comments about needing to start saving for retirement... old people.

I've had and quit two jobs now since retiring from the navy in '08. If I work, fine. If not, that's fine too. I consider myself retired. If I work a job it's because I enjoy the work. When it's no longer enjoyable, I quit. And I just did less than a month ago. If something interesting comes along, fine. I'll work again. But for now, I'm looking forward to a summer of bike riding. Because that's what I was put here on this earth to do, enjoy myself.

I think a simple frugal life is best. I seem to sleep better and have more of an interest in maintaining my health when I'm not working.

 

[Worldtraveller]

My retirement goal is to be able to retire, and live on the interest+SS and other residual income (I have a couple of small pensions that may be non-existent by the time I retire). So far, I'm on target to be able to retire 2-3 years early, live on the interest until full SS kicks in. We hope to be healthy enough to travel a fair amount when we retire so the base level won't probably keep up, but we will likely still have somewhere close to 7 figures to leave to trusts and some beneficiaries when we pass.

This all assumes that the markets are moderately stable, but does have a fair bit of buffer built in.

Unless you need the money now, or are struggling, I'd keep the 401K maxed at least, if I were you. This year, in additional to the standard deduction, we plan on making a one time contribution (we have until 4/15) to close to the max amount.

In about 5 years, we're scheduled to start moving into slightly more conservative funds. About every 3-5 years after that, we'll keep doing that until close to retirement.

I know a couple engineer who were close to retiring in ~2003 and their 401ks (and hence their potential income) about halved overnight....so they were still working for at least a couple more years.

 

[T.G.G. Moogly]

Being super conservative I decided to just find an investment company that I could trust and have a personal relationship with, and that ruled out all the big names. So I give them one percent a year but it's worth it to not have to worry about my investments. The one I found has been doing a super job and things look very good. Places like Merrill Lynch and UBS are crap, don't go there.

The only thing that kept me working to 65 was the cost of health care. We cashed in our life insurance policies because we just didn't need the coverage anymore, not because we needed the money.

We live modestly but aren't afraid to spend money. We definitely don't squeeze the nickel until the buffalo shits. Our advisor said that we can live off the interest until we're 92 years old. I plan on being dead long before that.

Don't gamble with money you cannot afford to lose. That would be my advice.

 

[rousseau]

The question is more about if you put the numbers into the coffer and they say, assuming a certain amount of growth, your planned retirement year, how long you want the money to last... if all of that is good, do you turn the contribution tap down or off at some point seeing the gain is going to diminish. Granted, if you are in your 50s, those dollars can be invested for 30 years still, and even 3% adds up to 2.4x after 30 years (staying ahead of inflation)!

Would your strategy change if you weren't assuming a certain amount of growth, and instead knew with certainty the dollar figure you'd have by a certain time? It might be a misread of your situation, but that sounds like the point of uncertainty of where you're at now, or else maybe you'd just stop saving and not worry about it.

Is there a risk that your assumption about growth is incorrect? That's probably what I'd look at. Continuing to save would minimize the risk of that assumption.

 

[Swammerdami]

Key questions before you can plan properly:

(1) Do you have children or grandchildren you hope to endow? If you're a good earner, you might want to continue saving and give your descendants a good head start.

(2) What level of spending do you plan on in retirement? Do you hope for frequent holidays at expensive resorts? Or will you be satisfied with much cheaper entertainment?

(3) Do you own an expensive home? Do you plan to sell it, or to live in it through retirement?

(4) Would you consider moving to a lower-cost country? Some Americans economize by retiring to places like Costa Rica or Thailand.

 

[J842P]

You should definitely just put it all in dogecoin.

 

[Loren Pechtel]

If you stop saving in your 50s that means you needed to have saved more earlier in life. The least pain is from saving a basically fixed percentage of your income. Note, however, that the means of saving doesn't always have to be traditional retirement accounts. IRA? Our first savings plan was paying down the mortgage. The money is still there in the value of the house, it's not taxed, and it increases our future available income. It's not exactly liquid but it's cheaper than IRA earth withdrawal penalties and the only downside I see is it lacks the judgment shield of retirement accounts.

 

[Jimmy Higgins]

If you stop saving in your 50s that means you needed to have saved more earlier in life.

Well, yeah, that is what the OP said.

The least pain is from saving a basically fixed percentage of your income. Note, however, that the means of saving doesn't always have to be traditional retirement accounts. IRA? Our first savings plan was paying down the mortgage.

I've been aggressive with that as well, hope to be done before 50.

I was more curious, is it crazy to stop saving for retirement in ones 50s if the numbers look good?

 

[Loren Pechtel]

If you stop saving in your 50s that means you needed to have saved more earlier in life.

Well, yeah, that is what the OP said.

The least pain is from saving a basically fixed percentage of your income. Note, however, that the means of saving doesn't always have to be traditional retirement accounts. IRA? Our first savings plan was paying down the mortgage.

I've been aggressive with that as well, hope to be done before 50.

I was more curious, is it crazy to stop saving for retirement in ones 50s if the numbers look good?

The ideal situation is to maintain the same standard of living over your remaining life. If you have so much saved that saving more now means you'll live better in retirement than in your working years then I can see it making sense to save less.

Personally, however, I don't think we can reasonably predict our lifespan (actuarial tables assume medical science is static, something I find very unlikely to be true) and thus ideally we should budget our retirement savings to last forever (live only on the gains over inflation.)

 

[T.G.G. Moogly]

Personally, however, I don't think we can reasonably predict our lifespan (actuarial tables assume medical science is static, something I find very unlikely to be true) and thus ideally we should budget our retirement savings to last forever (live only on the gains over inflation.)

If the quality of life is not compromised then certainly do that. But common sense would seem to indicate that we are going to have only so many quality years. Of course that differs among individuals but some of us don't want to spend ten or twenty years in a home which we perceive as extending only death, not life.

 

[Jarhyn]

Personally, my retirement strategy is: own my own home, pay off my mortgage.

Because the money I throw at that will always appreciate faster and more ethically than the money I could throw at claiming ownership of the work of others.

I've multiplied my investment by about 1000% in the last 5 years, and paid nothing in taxes.

 

[Loren Pechtel]

Personally, however, I don't think we can reasonably predict our lifespan (actuarial tables assume medical science is static, something I find very unlikely to be true) and thus ideally we should budget our retirement savings to last forever (live only on the gains over inflation.)

If the quality of life is not compromised then certainly do that. But common sense would seem to indicate that we are going to have only so many quality years. Of course that differs among individuals but some of us don't want to spend ten or twenty years in a home which we perceive as extending only death, not life.

There are already people walking around with lab-grown organs. So far it's only the simple stuff, but as time goes on they'll be able to do all of them. An awful lot of the body will be replaceable.

Personally, my retirement strategy is: own my own home, pay off my mortgage.

Because the money I throw at that will always appreciate faster and more ethically than the money I could throw at claiming ownership of the work of others.

I've multiplied my investment by about 1000% in the last 5 years, and paid nothing in taxes.

We haven't had anything like that sort of gain but I agree on the mortgage being the first investment.

 

[crazyfingers]

When my dad die he had provided that my mom would be able to live off the income from his investments pretty much indefinitely given the cost of assisted living. My mom's medical situation is starting to look like she could need nursing home and extra services essentially doubling her costs which means she will likely be drawing down her principle. Instead of having a nearly sure lifetime supply of money, it could be gone in 10 years or less depending.

I think that things are too uncertain to just stop saving before one actually retires.

 

[crazyfingers]

I also have a 401K rant. When I started contributing to my 401K in 1989, one benefit of a 401k was the expectation that the tax deferment would be a good thing. When retired I'd be making less money per year so would pay lower taxes on retirement. But the laws have changed such that when I start to withdraw from my 401k I will actually be required to withdraw a sum that is actually greater than my pre-bonus gross income. So my future taxes will actually be higher. WTF!

 

[atrib]

You can stop saving if you have achieved your goals, or can confidently predict that your current retirement savings will get you to your target by the time you stop working.

I assume that I will be drawing 5% of my savings every year without touching my principal amount, which is a very conservative estimate based on the actual returns I have realized over the last 20 years. If you know/estimate how much money you want to draw each year in retirement, and multiply that by 20, that would be a good, conservative target.

 

[Loren Pechtel]

You can stop saving if you have achieved your goals, or can confidently predict that your current retirement savings will get you to your target by the time you stop working.

I assume that I will be drawing 5% of my savings every year without touching my principal amount, which is a very conservative estimate based on the actual returns I have realized over the last 20 years. If you know/estimate how much money you want to draw each year in retirement, and multiply that by 20, that would be a good, conservative target.

That's not a safe level because you need to allow your principal to grow at the inflation rate or you will find your standard of living eroding over time.

 

[T.G.G. Moogly]

You can stop saving if you have achieved your goals, or can confidently predict that your current retirement savings will get you to your target by the time you stop working.

I assume that I will be drawing 5% of my savings every year without touching my principal amount, which is a very conservative estimate based on the actual returns I have realized over the last 20 years. If you know/estimate how much money you want to draw each year in retirement, and multiply that by 20, that would be a good, conservative target.

That's not a safe level because you need to allow your principal to grow at the inflation rate or you will find your standard of living eroding over time.

Lots of people downsize when they retire because they don't need a large house or a house at all anymore. I think we naturally lower our standard of living as we grow older, I certainly have, but it sure doesn't feel like I'm missing anything. It's all been a conscious decision to not want that or not need that and life becomes much simpler. It also becomes less costly because you just don't have the same outlays.

Unless inflation really takes off again like it has in the past I wouldn't be too concerned about maintaining a high standard of living. But if one is already living relatively modestly then yes, plan accordingly.