Should You Save Less For Retirement?

Gwen Merz was fresh out of college in 2014, working an information technology job she hated, when she decided early retirement was the answer. She socked away every dollar she could, saving as much as 70% of her income so that she could quit when she was 35.

Now 30, Merz thinks she may have saved too much. Her job and life goals have changed, but most of her $300,000 savings is in retirement accounts that can’t be touched without tax penalties. If she could do it over, she says she would either save less aggressively or put some of the money into a taxable investment account with less strict withdrawal rules.

“I would pay a little bit more in taxes on my salary but I would have that money available for me,” says Merz, who lives in St. Louis.

Some people save prodigious amounts so they can retire early or because they're worried they won't have enough for a comfortable retirement. But aggressive saving can have significant and sometimes unexpected costs, which is why it’s important to strike the right balance between saving for the future and living your life today.

On FIRE, but less so

Many people struggle to save anything for retirement, so the idea of saving “too much” may seem absurd. But there is a movement known as “Financial Independence, Retire Early,” or FIRE, that promotes saving enough to gain control over how you spend your days long before typical retirement age. Some FIRE bloggers retired in their 30s from well-paying jobs by dramatically cutting their expenses and saving 50% or more of their incomes.

Saving for a 20-year retirement is difficult enough. Planning for one that lasts 50 years or more often requires extreme frugality both before and after retirement, as FIRE adherents try to make their money last.

The FIRE movement inspired Merz to set her initial early retirement goal. After finding a more enjoyable job and buying a house, however, Merz has throttled back her savings goals and now plans to retire at 55. One unexpected bonus from saving less aggressively: She’s less stressed about money.

“I always felt like I could do more since there were people online doing more than me,” Merz says. “I really put myself under a lot of unnecessary stress and strain.”

Certified financial planner Malcolm Ethridge of Rockville, Maryland, doesn’t try to talk his clients out of the idea of retiring young. Many work in high-paying but demanding jobs in technology or finance and are feeling burned out by 80-hour workweeks.

“You're getting compensated well for the time you're putting in, but it's not sustainable,” Ethridge says. “There's only so long you can burn both ends of the candle before it disappears.”

Instead, he encourages them to save enough so they can switch to work they’re more passionate about, such as teaching, working for a nonprofit or starting a business.

“It’s not so much ‘I hate the job’ as ‘The thing that I do for a living takes a ton of my time and I don't feel like it makes the world that much better off,’” Ethridge says.

Working at least part time in retirement can not only reduce the amount you need to save, but also gives structure and purpose, Ethridge says.

“Retiring at 30 with $2 million sounds great. It makes me sound like I've conquered the world,” Ethridge says. “But I have nothing to do and nothing to be holding on to.”

Most will get to retirement age, but some won’t

Merz says that even while she was saving most of her income, she still enjoyed occasional splurges, such as trips to Australia and Ecuador and a $4,000 sewing machine for her quilting hobby.

Some super-savers, by contrast, are so focused on their futures that they neglect their present, says certified financial planner and physician Carolyn McClanahan of Jacksonville, Florida. As someone who has worked in hospital emergency rooms, McClanahan knows that the future isn’t guaranteed.

“We see people that die way too soon, or get some serious illness that totally changes the trajectory of their lives,” McClanahan says.

McClanahan wants people to save enough to live comfortably after they retire, but also to start working on their bucket list of experiences long before they quit work. If they love to travel or spend time with their families, for example, she recommends that they not wait until retirement to start.

“It’s making certain that if they found out they were going to die tomorrow, that they would be at peace with what they've done,” she says.