On Oversaving for Retirement

Could You Be Oversaving for Retirement?


The 80% replacement rule — which means workers should aim to replace that much of their pre-retirement income — is hardly a one-size fit-all model. Blanchett argues that the figure may be much lower for some workers, considering that some expenses, like taxes for Social Security and Medicare, work-associated costs like commuting, and pre- and post-tax retirement savings contributions all but disappear once you retire. On the flipside, it could wind up being higher for other workers, especially if they live in a state with a high income tax or expect to put their grandchildren through college. When Blanchett looked at four households earning between $37,500 and $225,000 a year, and factored in what they would need to have once they were no longer paying for these expenses in retirement, he found their ideal replacement rates varied widely — as low as 54% and as high as 87%. “Although a rule of thumb replacement rate of 70% to 80% is clearly reasonable, it isn’t ideal, and moreover, it is clear that the replacement rate is sensitive to the proportion of pre-tax expenses and post-tax expenses,” he says.
Comment: My own take is that we have under-saved and that we started about 10 years too late. Most recent projections for us see us retiring a bit later: Kathee at 65 ... me at 67 (3 more years)


  1. One thing that's always struck me is that how much one will need will in part be determined by how much one owes. Pay off that mortgage and car before you retire, and the amount you need each month drops a lot.

    On the flip side, as Socialist Insecurity and Medicare collapse, there goes THAT savings! :^)

  2. There are nice retirement communities long island that you can stay in for your retirement. It's a great investment. If you want an active and interactive place to stay, it's the right place just for you.


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