I was talking to a friend of mine recently who explained that he just isn't interested in socking money away for retirement -- so much so that he's nearing his mid-40s with only a few thousand dollars saved. His logic is that he's alive and healthy now, but who knows how long he'll live or whether he'll be able to get out and about as a senior? As such, he'd rather spend his money enjoying life in his 40s than worry about paying bills in his 60s and beyond.
I happen to think that his approach to retirement is pretty reckless. And trust me when I say that I tried imploring him to start prioritizing retirement savings to some degree or otherwise risk being truly cash-strapped later in life.
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But I can also admit that I didn't always have the healthiest approach to retirement savings, either. There was a period in my life years ago when I found myself growing increasingly anxious about retirement -- so much so that I pledged to sock away every spare dollar I could get my hands on.
During that time, I maxed out my retirement account. And when I was done doing that, I put my extra money into a brokerage account for long-term savings purposes.
Now I won't say that I did things like skimp on food and electricity to be able to save aggressively for retirement. But I know there were several years when I cut back on things like leisure spending in a very big way to give my nest egg a boost. And looking back, I recognize that I really went overboard.
There is such a thing as saving too much
You'll often hear that there's no such thing as having too much money for retirement. But I happen to disagree, to an extent. I think there is such a thing as over-saving, and I think saving at the expense of your near-term happiness is far from optimal.
Now if you're in a position where money is very tight and you have to choose between saving $1,000 a year for retirement versus spending that money on leisure, then unfortunately, the former should win out. That's because you're going to need some savings to live on in addition to Social Security.
But let's say you're someone who's already saving a good 20% of your income for the future. Should you really be denying yourself near-term luxuries to be able to make it 25% or 30%?
The one thing I do agree with my friend on is that nobody know what the future has in store. So it's not actually a great idea to keep putting off goals in the hopes that you'll accomplish them later on.
My friend could be saving thousands of dollars a year for retirement, but instead, he opts to take that money and use it to travel. He doesn't care if he's unable to travel in retirement due to being short on funds because, as he puts it, who knows if it'll even be an option?
I think there's a middle ground between saving for retirement so aggressively that you're not enjoying life at present, and not saving at all because you don't know what the future holds. In my friend's case, I'd say split the difference. Rather than travel to the tune of $15,000 a year, take half of that money and stick it into a 401(k). Take the other half and enjoy whatever new destination is on your radar.
It's all about striking a balance
These days, I don't save for retirement quite as aggressively as I once did. I still put away a nice chunk of my income, but I let myself spend more freely on the things that bring me joy.
It's important to set yourself up with savings for retirement because living on Social Security alone could mean struggling immensely to cover your costs. But that doesn't mean you have to put every single penny of yours into an account that's earmarked for retirement. And if you learn to strike a good balance, you may find that you get the best of both worlds -- near-term fulfillment and long-term peace of mind.
