Saving for retirement is important, but if it's making your current life miserable, you might give yourself permission to cut back. If you plan to work into your 60s and can collect Social Security, you might need less to retire than you think.

Recently we showed you how you can save your first $100,000 within 5 years on a modest salary. While it’s possible, it doesn’t come without hard work and sacrifice. And sometimes that sacrifice comes at the expense of enjoying your present life.

Many of us worry about the future. It’s normal. We can’t predict what’s going to happen to us or our finances, so we save as much as we can. But what if we’re actually saving too much?

We also recently explained why you should strive to save about 20 percent of your income. Is it better to save more? Possibly. But it’s also possible to go overboard. We’re so influenced by things like books, blogs, movies, TV shows, friends, and family. And the list goes on. When did we become so programmed to think we need millions of dollars to retire?

It’s like we get this sense that we have to have so much more money to live off each year than we are living off of now. Have we come to believe that when we retire, our income should actually go up?

In this article, I’ll show you some math behind why you might be saving too much money. From there, it’s up to you to decide how much you want to save. Just be aware that you don’t have to completely forgo pleasures in the present to secure a comfortable retirement.

Are you saving too much?

Most of us think we need some crazy amount of money in retirement to live well. This is partly because we’re surrounded by the media telling us we need to save, save, save!

Don’t get me wrong, saving money for retirement is crucial. If you don’t plan, you may never actually see the finish line. But believe me when I tell you that you don’t need as much money as you think you do to retire.

Gallup recently did a survey that shows the average age of retirement is 62. By this age, many of your current expenses will actually go down, or be completely gone.

For instance, many of you will not have a mortgage payment by the time you reach age 62. Unless, of course, you got a 30-year mortgage in your mid-30s or refinanced many times.

Also, if you had kids, most of the costs associated with them will be gone come retirement time. Seeing as how it costs about $300,000 to raise a kid from birth to 18, this could give your bank account a serious boost.

The point is, once you reach retirement age, you won’t be in the same place financially. Things like pensions, Medicare, and Social Security will also supplement your income and cut expenses.

A numbers reality check: Are you saving too much money?

So how much do you really need to retire? That number is going to differ for all of us. The Motley Fool says that you can get a ballpark estimate of what you’ll need to retire by multiplying your annualized costs by 25 and making sure your portfolio has enough to cover that. To do this, you’ll need to do a little estimating and forecasting. Let’s try an example:

We’ll plan for retirement at age 62, using the number from above. Let’s say you’re currently 25 years old, making $40,000 per year.

We’ll assume you take a relatively conservative career path and your salary grows annually at the average rate of 3.1 percent. Using this calculator to plug in the numbers, this would have you making just under $124,000 per year at age 62, not adjusting for inflation of course.

That’s pretty solid career growth.

Say you took out a 30-year mortgage when you were 25, too. That’ll have been paid off at age 55–seven years before you retire. Even if you waited until you were 30, it’d still have been paid off two years before retirement.

We’ll say you have two kids, one at age 30, the other at age 32. Both kids should be out of college and on their own (hopefully) just before your mortgage is paid off.

And how about that food bill? When there were four of you living in the home, it was probably higher than it’s going to be with just you and your significant other during retirement.

The average annual expenses in retirement are about $50,000

So let’s use these rough estimates as a guideline for how much you’ll spend in retirement. Say your annual expenses are $50,000. Using the suggestion from The Motley Fool, we’ll multiply that by 25:

$50,000 x 25 = $1,250,000

But wait! We’re also going to assume you’ll take Social Security at age 62. (You could potentially collect even more from Social Security by deferring your benefits by up to five years.)

Using the SSA’s Quick Calculator, I plugged in your ending $124,000 salary and about $2,000 per month in Social Security. That’s $24,000 per year!

Using the above formula, we’ll subtract that $24,000 from our $50,000 in expenses:

$50,000 – $24,000 = $26,000

So after your Social Security benefits kick in, you’re unrealized expenses will be more like $26,000.

Now we’ll use THAT number to multiply by 25 and see how much we truly need in retirement:

$26,000 x 25 = $650,000

So according to this formula, you’ll only need $650,000 to safely retire at age 62. Remember, you won’t have kids to care for or a mortgage.

Please understand that this is merely an example, and a rough estimate at that. The point is to show that you might not need as much as you think you do to retire.

Focus on saving as much as you can without sacrificing your current well-being. Do everything you can to buy a home and pay it off as quickly as possible. And it doesn’t hurt to start putting money away for junior when they’re born—that will further cut your costs as you approach retirement.


Again, we’re not saying shoot for only $650,000 in a retirement portfolio. Inflation, taxes and things you’ll want to have money for when you retire will make your actual number bigger. And this number assumes that many things go according to plan, including access to full Social Security benefits. (Although many Millennials are skeptical about the future of Social Security, we do believe it will be around in some form.)

All that said, next week we’re going to make a counterpoint for why–if you want to retire early–you might need to save as much as $2 million!

The case we’re trying to make today is that planning for your future is the right thing to do, but if the sacrifices you’re making to save for later are making you miserable now, you might cut yourself some slack. Read more about how to give yourself permission to spend intentionally on things that are important to you.

As long as you’re living within your means, saving as much money as often as you can, and setting proper goals to pay off debts like your mortgage, you should be just fine.

How much have you or are you on pace to save for retirement? Do you think you’re saving too much?

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About the author

Chris Muller picture
Total Articles: 279
Chris has an MBA with a focus in advanced investments and has been writing about all things personal finance since 2015. He’s also built and run a digital marketing agency, focusing on content marketing, copywriting, and SEO, since 2016. You can connect with Chris on Twitter.