2 Signs You’re Saving Too Much Money For Your Retirement

Saving too much for retirement can be a bad thing, although it’s not that common.

“An overwhelming majority of people save enough or not enough,” says SoFi financial planner Brian Walsh. “It’s rare for someone to save too much for retirement.”

However, if you are saving too much, there are two obvious signs.

1. You consistently exceed annual subscription limits on your accounts

If you regularly contribute too much to your retirement accounts, you may be saving too much for retirement, says Albert financial planner Michaela McDonald.

Tax-advantaged retirement accounts have limits, allowing savers to contribute only a certain amount per year. For 2021, the limit for an IRA is $6,000 and $7,000 for those over 50. For 401(k) plans, the limit is $19,500 per person, per year.

Walsh says it’s all about balance and not just contributing to limited retirement accounts. “It’s great for saving for retirement, but a lot of these retirement accounts have restrictions on when you can access the money without paying taxes or penalties,” Walsh says.

Especially if you decide to retire early, it’s critical to save on accounts that aren’t age dependent. “It really reduces your flexibility on the road,” he says.

Contributing too much may mean paying a fine or withdrawing money. And that could be a sign that you’re saving too much.

2. You are not meeting your other money goals

Saving too much for retirement could mean you’re having trouble keeping up with your other goals.

“More broadly what we’re seeing emerging is: [people] they ignore all their other savings goals and only save for retirement,” says Walsh. Short-term goals, such as buying a house, going on vacation, or starting a family, don’t always make sense to sacrifice for retirement.

Instead, both financial planners recommend focusing on the things you can only do now, even if it means saving less for later. “Maybe you’re putting off having a child, or you’re putting off moving to a bigger house that fits your family because of your retirement worries, that’s a bit of a red flag,” McDonald says. “Now you want to build a good life for yourself and enjoy it.”

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