Turns Out, No One Ever Complained about Investing Too Much for Retirement

Can you Save or Invest too much. It sounds ridiculous but it’s a question that social media has been asking for years. The ideas and murmurs are often relegated to the pilgrimage of Work-Life balance or the cult-like Great Resignation.

Is this fear justified or is it ridiculous?

Well I’m Investing too much…

If you are new, here’s the break down.

I go by the moniker, The Neighborhood Finance Guy. I write about financial literacy topics to include investment strategies, market performance, retiring early and financial freedom. To say the least, the goal is to help you make effective decisions and set S.M.A.R.T+ER goals with your money.

On my ten-years journey to become a millionaire, I can say that although the information is free but the struggle is not sold separately. This is grueling and from the outside, it looks like a sacrifice. My wife and I invest over $5,000 per month compared to the average US household’s $6,760 per year.

$17k Average Savings/Investments Sounds Ridiculous, but it’s True!

Average American has $17,135 in a Savings or Investment Account, According to New State-by-State Survey Findings From Slickdeals. New Yorkers are the most savings-conscious Americans, putting away 14.5% of their income towards savings goals or investment accounts.

While the typical 20-something has a median account balance of just over $10,700, the typical 60-something has over $210,000. Research by the Federal Reserve found that the median retirement account balance in the U.S. – looking only at those who have retirement accounts – was just $65,000 in 2019.

The median emergency fund comes in at $5,000, according to the 21st Annual TransAmerica Retirement Survey. The median balances for Gen Z workers is $2,000 and $5,000 for millennial workers.

80% Depend on Social Security. It’s Going to Be a Retirement Nightmare

For many Americans, Social Security benefits are the only source of income during their retirement. Unfortunately, Social Security was never meant to be the sole source of retirement income. As of 2022, the three stool retirement strategy is looking wobbly.

Retired workers average a monthly Social Security benefit of $1,658 as of January 2022 – just above the poverty level of $12,880 annually based on the Department of Health and Human Service’s (HHS) poverty guideline. Add the rising inflation and enduring debt levels among older Americans, most will retire to the couch and austere measures.

It’s a retiree’s worst but extremely common nightmare. Investing too much is not the issue, not hedging against the future is.

Investing too much for Retirement is not the problem

You’re probably thinking, “Yeah no surprises there. Inflation has prices up.”

I agree with you. Life tosses us more curves every time we are up to bat. I could be a flat tire here or going out to eat, it’s summarily difficult to go without paying for something. On top of that, you have to figure out retirement too.

It’s too much!

What’s worst is doing nothing. Most Americans have as much as $150,000 saved by retirement while still carrying a mortgage and other consumer debts. While the US government is rushing to help with the SECURE Act 2.0, there is still a lot to do as a consumer.

You have to begin investing with the end in mind. And, it’s not too much to bear.

Financial Literacy is the Solution. You Knew that Right?

Financial literacy is the ability to understand and make use of a variety of financial skills, including personal financial management, budgeting, etc. It’s surprisingly simple. Live differently.

First start with a list of your goals. See that’s not so hard.

Once you establish that, it’s time for the heavy lifting:

1. Take your total average annual income from three years prior.
2. Factor out 27.75% to get your net after tax amount and retirement expenses needed annually.
3. Multiply that by 27.5 years to figure out how much investments you need.

For example, the average US household bringing in $80,000 would need to reach investments of nearly $1.6 Million. Why $1.6 Million – It’s just enough to keep up with your current lifestyle.

So Are You Investing Too Much or Enough? It Depends!

Based on $1.6 million, do you need that much? Well that depends on your time window.

Here’s how the math breaks out if you are starting today with no other investments. Remember current saving/investing rates are about $563.33 per month.

Age Group	Retirement Time Window	Monthly Contributions	Total Contributions	Total Interest Gained
27	+40	$496.73	$238,439	$1,361,571
32	+35	$746.77	$313,642	$1,286,358
37	+30	$1,135.92	$408,931	$1,191,069
42	+25	$1,760.19	$528,058	$1,071,942
47	+20	$2,811.96	$674,869	$925,131
52	+15	$4,739.25	$853,065	$746,935
57	+10	$8,882.76	$1,065,931	$534,069

However if all the match and numbers comes off confusing; Tom Armstrong, head of customer analysis and insight at Voya Financial, says that “most individuals should be saving enough to generate at least 70% of their pre-retirement income in retirement.”

To hit that goal, you need to put away between 10% and 15% of their salary each month (pretax).

Tips for Maximizing your Financial Health and Invest Too Much Intentionally!

Instead of thinking of money as an obstacle, think of the possibilities. Start off with your goals and dreams and start imagining how you get there. A thorough approach to investing start with a financial plan. Creating a strategic approach is a deliberate way to change your life and the outcomes.

Think of it like manifest destiny.

Remember that the plan (although well constructed) is destined to fail. That’s what a plan is. It’s merely the GPS to get you on the road and tweak and changes when you face challenges. Again, the plan will fail and that’s part of the plan.

Here are some tips on saving and investing too much:

1. Create a budget and a Financial Plan: Budgeting can help you know exactly where your money is going each month, enabling you to develop strategies to reduce spending and contribute more money to savings.
2. Automate your investments: Scheduling automatic allocations from your monthly income to either a savings account or retirement plan can help you ensure you are contributing to your savings, save on your taxes and benefit from compounding growth. 
3. Invest in different ways: Using different vehicles is part of your overall wealth strategy. From maximizing your employer plan like a 401k, 403b, or 457b or creating passive income. There are multiple way to build your vault.
4. Consult your wealth team: A wealth team is comprised on certified and licensed professionals that know what you don’t know intimately. This is why you need to become financially literate and engage your network.

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