Comments on: Are Americans Saving Too Much for Retirement? An Interview with Laurence Kotlikoff http://allfinancialmatters.com/2007/04/27/are-americans-saving-too-much-for-retirement-an-interview-with-laurence-kotlikoff/ A personal finance blog dedicated to discussing such topics as budgeting, asset allocation, 401K, IRA, cash flow, insurance, financial planning, portfolio management, and other areas in personal finance. Fri, 20 Nov 2009 19:56:44 -0800 http://wordpress.org/?v=abc hourly 1 By: Chris http://allfinancialmatters.com/2007/04/27/are-americans-saving-too-much-for-retirement-an-interview-with-laurence-kotlikoff/comment-page-1/#comment-100767 Chris Mon, 30 Apr 2007 18:35:42 +0000 http://allfinancialmatters.com/2007/04/27/are-americans-saving-too-much-for-retirement-an-interview-with-laurence-kotlikoff/#comment-100767 Wasn't the 2005 savings rate in the US negative? Any numbers for 2006? How can we be saving too much? Wasn’t the 2005 savings rate in the US negative? Any numbers for 2006? How can we be saving too much?

]]> By: plonkee http://allfinancialmatters.com/2007/04/27/are-americans-saving-too-much-for-retirement-an-interview-with-laurence-kotlikoff/comment-page-1/#comment-100720 plonkee Mon, 30 Apr 2007 12:44:51 +0000 http://allfinancialmatters.com/2007/04/27/are-americans-saving-too-much-for-retirement-an-interview-with-laurence-kotlikoff/#comment-100720 Presumably, as you get closer to retirement, the amount of money you're going to need becomes clearer. That is you'll have a larger pot and lots of the growth will have already happened, so you are better able to make decisions about your level of savings. Presumably, as you get closer to retirement, the amount of money you’re going to need becomes clearer. That is you’ll have a larger pot and lots of the growth will have already happened, so you are better able to make decisions about your level of savings.

]]> By: PFigg http://allfinancialmatters.com/2007/04/27/are-americans-saving-too-much-for-retirement-an-interview-with-laurence-kotlikoff/comment-page-1/#comment-100531 PFigg Sun, 29 Apr 2007 19:05:45 +0000 http://allfinancialmatters.com/2007/04/27/are-americans-saving-too-much-for-retirement-an-interview-with-laurence-kotlikoff/#comment-100531 My wife and I put away somewhere around 20% of our take-home pay for retirement. That may be too much, but in actuality, we're only maxing out our Roth IRAs. If you factor in the high likelihood that our income will go up in the future, and that we're not going to save a larger amount of money every month just because our income goes up, the current rate of retirement savings seems quite reasonable. My wife and I put away somewhere around 20% of our take-home pay for retirement. That may be too much, but in actuality, we’re only maxing out our Roth IRAs. If you factor in the high likelihood that our income will go up in the future, and that we’re not going to save a larger amount of money every month just because our income goes up, the current rate of retirement savings seems quite reasonable.

]]> By: Miguel http://allfinancialmatters.com/2007/04/27/are-americans-saving-too-much-for-retirement-an-interview-with-laurence-kotlikoff/comment-page-1/#comment-100186 Miguel Fri, 27 Apr 2007 22:03:37 +0000 http://allfinancialmatters.com/2007/04/27/are-americans-saving-too-much-for-retirement-an-interview-with-laurence-kotlikoff/#comment-100186 As noted by some folks above, the best arguement for perhaps saving "more than you need to" is that the risks are asymetric: - If you undersave, by the time you discover your mistake, the ability to make up for it will be greatly diminished. In other words, you're totally screwed. - But if you oversave, you can cut back on saving further down the road when there is greater certainty. Then you could treat yourself to luxuries you had forgone, maybe retire earlier than planned, or make some positive life changes you were not counting on. I know people in both camps. To be honest, I don't think any of them, on either side of the issue, regret their choices. It seems to be an almost philosphical issue. Some people are happiest when they can have it now, even if that leaves them "without a pot to piss in" as the saying goes. Those are usually the same people that figure family will bail them out. (What's mine is yours and whats yours is mine, you just happen to have a lot more.). Others feel better about life when they know they'll be prepared for the worst. As noted by some folks above, the best arguement for perhaps saving “more than you need to” is that the risks are asymetric:

- If you undersave, by the time you discover your mistake, the ability to make up for it will be greatly diminished. In other words, you’re totally screwed.

- But if you oversave, you can cut back on saving further down the road when there is greater certainty. Then you could treat yourself to luxuries you had forgone, maybe retire earlier than planned, or make some positive life changes you were not counting on.

I know people in both camps. To be honest, I don’t think any of them, on either side of the issue, regret their choices. It seems to be an almost philosphical issue. Some people are happiest when they can have it now, even if that leaves them “without a pot to piss in” as the saying goes. Those are usually the same people that figure family will bail them out. (What’s mine is yours and whats yours is mine, you just happen to have a lot more.).

Others feel better about life when they know they’ll be prepared for the worst.

]]> By: Andrew Morse http://allfinancialmatters.com/2007/04/27/are-americans-saving-too-much-for-retirement-an-interview-with-laurence-kotlikoff/comment-page-1/#comment-100169 Andrew Morse Fri, 27 Apr 2007 20:22:07 +0000 http://allfinancialmatters.com/2007/04/27/are-americans-saving-too-much-for-retirement-an-interview-with-laurence-kotlikoff/#comment-100169 I tend to agree with Brennan's argument. While it may be possible to "smooth" your consumption and get a modest increase in your standard of living in the present, you are still placing a lot of faith in some pretty abstract math. The idea that a small sacrifice now can give you big gains over time and increase your options later in life is a no brainer. If I'm going to err a bit, it had better be on the plus side! The most important part of the argument is the statement "Developing a clear picture of the tradeoffs is the first step." That is absolutely true. You can choose to live marginally better in the present, but you need to understand the opportunity costs of that choice. In my opinion making a small sacrifice now for greater future rewards is the wiser choice. I tend to agree with Brennan’s argument. While it may be possible to “smooth” your consumption and get a modest increase in your standard of living in the present, you are still placing a lot of faith in some pretty abstract math. The idea that a small sacrifice now can give you big gains over time and increase your options later in life is a no brainer. If I’m going to err a bit, it had better be on the plus side!

The most important part of the argument is the statement “Developing a clear picture of the tradeoffs is the first step.” That is absolutely true. You can choose to live marginally better in the present, but you need to understand the opportunity costs of that choice.

In my opinion making a small sacrifice now for greater future rewards is the wiser choice.

]]> By: trip http://allfinancialmatters.com/2007/04/27/are-americans-saving-too-much-for-retirement-an-interview-with-laurence-kotlikoff/comment-page-1/#comment-100137 trip Fri, 27 Apr 2007 15:25:34 +0000 http://allfinancialmatters.com/2007/04/27/are-americans-saving-too-much-for-retirement-an-interview-with-laurence-kotlikoff/#comment-100137 <a href="http://www.vanguard.com/VGApp/hnw/VanguardViewsArticle?ArticleJSP=/freshness/News_and_Views/news_ALL_chaircorner_04272007_ALL.jsp&SYND=RSS&Channel=MFN" rel="nofollow">Vanguard responds</a> Vanguard responds

]]> By: JLP http://allfinancialmatters.com/2007/04/27/are-americans-saving-too-much-for-retirement-an-interview-with-laurence-kotlikoff/comment-page-1/#comment-100130 JLP Fri, 27 Apr 2007 14:41:04 +0000 http://allfinancialmatters.com/2007/04/27/are-americans-saving-too-much-for-retirement-an-interview-with-laurence-kotlikoff/#comment-100130 Miguel, I'll agree with that! KMull, As a nation, I'm sure that's true. However, that doesn't mean that <em>some</em> people aren't saving too much, which is the point that Kotlikoff is trying to make. Miguel,

I’ll agree with that!

KMull,

As a nation, I’m sure that’s true. However, that doesn’t mean that some people aren’t saving too much, which is the point that Kotlikoff is trying to make.

]]> By: KMull http://allfinancialmatters.com/2007/04/27/are-americans-saving-too-much-for-retirement-an-interview-with-laurence-kotlikoff/comment-page-1/#comment-100129 KMull Fri, 27 Apr 2007 14:34:02 +0000 http://allfinancialmatters.com/2007/04/27/are-americans-saving-too-much-for-retirement-an-interview-with-laurence-kotlikoff/#comment-100129 America has a debt and spending problem. I think that is pretty evident to everyone. Am I wrong here? America has a debt and spending problem. I think that is pretty evident to everyone. Am I wrong here?

]]> By: Miguel http://allfinancialmatters.com/2007/04/27/are-americans-saving-too-much-for-retirement-an-interview-with-laurence-kotlikoff/comment-page-1/#comment-100125 Miguel Fri, 27 Apr 2007 13:51:18 +0000 http://allfinancialmatters.com/2007/04/27/are-americans-saving-too-much-for-retirement-an-interview-with-laurence-kotlikoff/#comment-100125 Are saving too much for retirement. It's hard to beleive when you read things like this blurb from CNNMoney: "In a 2007 survey by the Employee Benefit Research Institute, a nonpartisan research organization, about a half of workers ages 35 to 44 said they had salted away less than $25,000 for retirement. " So, who are these supersavers Kotlikoff is so concerned about? I dunno. Probably paranoid people like me who actually have financial planners and run retirement projections. I would much much much rather oversave and sleep well at night, rather than risk undersaving. But, perhaps thats easy for me to say since I don't feel like I'm skimping very much on lifestyle. Are planners very conservative in their calculations - absolutely and I don't blame them. Why should they risk you missing the goal. Are saving too much for retirement. It’s hard to beleive when you read things like this blurb from CNNMoney:

“In a 2007 survey by the Employee Benefit Research Institute, a nonpartisan research organization, about a half of workers ages 35 to 44 said they had salted away less than $25,000 for retirement. ”

So, who are these supersavers Kotlikoff is so concerned about? I dunno. Probably paranoid people like me who actually have financial planners and run retirement projections. I would much much much rather oversave and sleep well at night, rather than risk undersaving. But, perhaps thats easy for me to say since I don’t feel like I’m skimping very much on lifestyle.

Are planners very conservative in their calculations – absolutely and I don’t blame them. Why should they risk you missing the goal.

]]> By: Leslie Turek http://allfinancialmatters.com/2007/04/27/are-americans-saving-too-much-for-retirement-an-interview-with-laurence-kotlikoff/comment-page-1/#comment-100122 Leslie Turek Fri, 27 Apr 2007 13:19:28 +0000 http://allfinancialmatters.com/2007/04/27/are-americans-saving-too-much-for-retirement-an-interview-with-laurence-kotlikoff/#comment-100122 Some people, as they get older, think about rejecting the American standard of overconsumption and start to live a simpler life. The environmental crisis is another push for us to reduce our consumption in the future. At the start of my retirement, I've scaled back my consumption greatly. I don't think of this as "living in poverty", but as living in balance with the world. I still spend money on things that I really use and which add to my quality of life (an iPod, a Tivo, a computer), but otherwise don't acquire lots of "stuff". Health insurance (I'm still pre-Medicare) is one of my biggest expenses right now. I guess it also depends if you've got children to leave your money to. I don't, so there's no incentive to accumulate more than I will need. Some people, as they get older, think about rejecting the American standard of overconsumption and start to live a simpler life. The environmental crisis is another push for us to reduce our consumption in the future. At the start of my retirement, I’ve scaled back my consumption greatly. I don’t think of this as “living in poverty”, but as living in balance with the world. I still spend money on things that I really use and which add to my quality of life (an iPod, a Tivo, a computer), but otherwise don’t acquire lots of “stuff”. Health insurance (I’m still pre-Medicare) is one of my biggest expenses right now.

I guess it also depends if you’ve got children to leave your money to. I don’t, so there’s no incentive to accumulate more than I will need.

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