This Day On The Street
Continue to site
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Retirement Dilemma: Live the Life or Save More?

"There is a lot of hand-wringing about the state of Americans' retirement savings, particularly in the wake of large wealth losses during the recent recession," Nichols says. "But the concern is based in part on implausible targets for expenditures in retirement."

Nichols warns of the dangers of saving too much, saying the traditional rule of thumb advocated by many financial planners -- replacing 80% of preretirement income -- is misguided. Instead, Nichols suggests lowering target spending in retirement.

"If one aimed to replace four-fifths of preretirement income in retirement, and saved two-thirds of income for 20 years to hit that target, spending would more than double at the moment of retirement, which is clearly not optimal," Nichols says. "Who wants to double their spending the day they retire?"

Let's say you're 50 years old and you have the money to spend on a trip around the world that you've been meaning to take with your spouse. Should you postpone that trip in order to put more money in your retirement account?

Must Read: Retirement Reality: Let's Raise the Mandatory Distribution Age

"If you're focusing on replacing a large percentage of your retirement income, and in doing so you make uncomfortable and unnecessary sacrifices now, you could lose out," Nichols says. "You don't want to be saving excessively for a future that may never come."

A 2009 report by the Brookings Institution and University of Wisconsin-Madison found that most Americans are generally saving enough for retirement. This is in stark contrast to discussions in the popular media and in policy circles that Americans are doing a poor job preparing for retirement.

2 of 4

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
SYM TRADE IT LAST %CHG
AAPL $112.76 -0.47%
FB $89.43 -1.74%
GOOG $618.25 -1.92%
TSLA $249.06 0.23%
YHOO $32.24 -2.72%

Markets

Chart of I:DJI
DOW 16,528.03 -114.98 -0.69%
S&P 500 1,972.18 -16.69 -0.84%
NASDAQ 4,776.5080 -51.8170 -1.07%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs