When to start reducing contribution into retirement accounts?

Hi all, I wanted to get you opinions and advice.

Currently 40, have about $2m in retirement account another $1m equity in houses, $500k cash savings. When do you feel its enough to start reducing the amount we contribute towards 401k, IRA, and savings?

We’re lucky to have made our way towards high income earners the last 5 years, around 400k annual, but for the most part still maintain the scarcity/savings mind set. Because of this our take home pay after all contributions, savings buckets, etc is 20% of our annual income. To me it still feels like we’re being too lavish, however, my wife has opposing opinions and feels like we can start reducing the amount we contribute and start living a little more.

So the question is, is my wife correct and how do I mentally transition away from the save, save, save mind set?


I think you can reach a point where you save too much money, especially if it is all in pre-tax (IRA or 401K) accounts. You don’t want to create a “tax time bomb” from large RMDs in your future. So I’d suggest putting some money into Roth accounts or just after tax accounts. And you’re not the only one who struggles with switching from the “save save save” mindset to spending some of it and enjoying life before it is too late. If you can withdraw enough money to live on from your investments, and the principle is still growing, you can probably stop worrying about saving more money.

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I, too, have the save save save mentality, even now that my husband and I are retired. What I’ve found helpful is a retirement planner spreadsheet we bought (The Complete Retirement Planner). We entered all our assets, our ages, when we think we’re gonna start Social Security & PIA amounts, state & federal tax rates, and entered any planned large expenses in the future like buying an RV, adjusted some of the assumptions, and it shows us how long our money will last, including what our income will be, when RMDs start, taxes paid, etc. We make copies of the spreadsheet to make changes, e.g. what if one of us starts SS later, so that we can compare different scenarios. It helps me transition sooner to spend spend because it always indicates we’ll outlive our money. I still save, of course. :wink:

So I’d recommend you get a retirement planner and go through the process. You might like what you see, and start enjoying life a little more now.

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Agree with previous post that using a financial planning tool (we use The Complete Retirement Planner as well) can be very helpful because you can model contributing different amounts to different types of accounts, by year/age. Or you can plan to spend more to keep your wife happy! Either way, seeing what the result of your actions will be well in advance is very informative and will help guide you.

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Congrats on being max savers. So for every dollar you earn, you live off 20 cents? That’s amazing. I think the logical, objective answer to your question is yes. You can stop saving so much for retirement. You might consider just contributing enough for the full employer match (if you have a 401k or similar). You can divert money to Roth IRAs which are more flexible. You might set up a donor-advised fund if you’re interested in charities or philanthropy.

Most of us feel like there’s never enough money, whether we earn $40K or $400K. It’s a psychological trick. I think in your situation it’s less about earning and saving and more about what do you want to do in your day-to-day lifestyle.

Maybe get a 3rd party to objectively assess your situation. A fee-only financial planner would be worth it. Or even a life coach who can quiz you on what you want to get out of life and help you set goals.

You might read the book Die With Zero which helped me put finances into perspective. If you were to die with millions in the bank, is that what you’d want your legacy to be? Or would you rather spend down your assets while alive where you can see the benefits yourself and not a future generation? There’s no one answer but might help to talk it through.

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If you make more money than you spend, you only have three choices;

  1. Stop working, or ask for a decrease in pay
  2. Give the excess away
  3. Save or invest it
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You forgot one:
4. Spend more.

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