First, let’s make one thing clear: The retirement savings crisis is real.

Almost half of all working households have no retirement savings at all, and many more have managed to save only a paltry amount. But if you’re reading this website, chances are you’ve spent a fair amount of time focusing on investments and retirement savings. You’ve probably run the retirement savings calculator and are saving aggressively to come up with some six-figure number that you supposedly need to accumulate before you can stop working.

retirement-savings

But maybe, just maybe, you’re saving too much.

The problem is that most retirement calculators assume your current expenses will continue into retirement while your current earnings will disappear. The truth is that everyone’s situation is different, which makes predicting retirement needs highly individual. Here are some reasons you may be saving too much:

Expenses can go way down in retirement. For many households, the mortgage is the biggest expense. But paying off a mortgage before retiring is a game-changer – one that slashes monthly expenses and frees up a lot of discretionary income.

If your children are out of college, you’ll be spending even less. Or, you may choose to downsize to a smaller and less expensive home. Many retirees also report that other expenses such as work clothes also go way down in retirement and that they live quite well on significantly less. T. Rowe Price found that three years into retirement, retirees are living on an average of 66% of their pre-retirement income.

But keep in mind: Some costs, like healthcare, are likely to go up in your later years.

Income may decline but not disappear. There are all sorts of ways that people continue to earn money in retirement. Those who have invested in real estate may have a passive source of income. Others with marketable skills may discover they are able to do contract work on a part-time basis while still living the retiree lifestyle. Renting out that finished basement could also provide a steady source of income. If you can earn even a small share of your pre-retirement income, it’s that much less income that you have to replace with retirement savings.

But keep in mind: Retirement is long. A woman reaching age 65 today can expect to live to age 87. Many will live even longer. Holding down a part-time job will be harder at 90 than 65.

You will work until 70 or later. By delaying your retirement until 70, you not only shorten the span of your life that will be dependent on retirement savings, you also give yourself more time to save. Perhaps more important, your social security income will be significantly higher than if you retired at 66, and could be almost double the amount you’d collect from taking early retirement at 62. That’s why most financial advisors will tell you that if you are able to work into your later years you should consider doing so.

But keep in mind: Not everybody can choose when they retire. Workers with physically demanding jobs may not be able to work beyond their early sixties and other workers with sedentary jobs may be thrust into early retirement after a late-career layoff.

You have that most coveted of retirement tools: a pension. Sure, pensions are quickly becoming an endangered species, but about 22% of full-time private industry workers still have a defined pension benefit. That’s down sharply from a generation ago. But if you’re in that still sizable minority of people who stand to collect a pension, you can expect to have at least some of your retirement costs covered. Consider a relatively modest pension payment of $20,000 a year: Assuming a 5% return on savings, you’d have to have $400,000 in savings to generate that much income.

But keep in mind: Some employers have gutted their pensions. If you have one, be happy for it, but don’t put all your eggs in this basket.

If you think you may be saving too much: First, congratulations. There are worse things than facing death with millions in the bank.

But also, consider the cost. We save so that we can enjoy our later years but if we are saving too much we may be denying ourselves some of life’s pleasures today. The right approach to retirement involves understanding your goals and the amount of money you’ll need to realize them.

If you’re scrimping in order to put as much as possible into retirement savings, you could be putting your life on hold unnecessarily.

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Published by Wyatt Investment Research at