Are you saving too much for retirement?

The CEO of Vanguard posted a rebutal to allegations that financial services create a climate of fear in order to encourage over-saving.

I’m a saver, so I think I’m in the same camp as him that the risk of saving too much money isn’t the worst threat in the world. On the flip side, I think some people spend time in real fear and anguish worrying about eating dog food in their golden years, and preying on those fears (especially to make a buck) isn’t the most noble of sales techniques.

I think the ideal situation would be rather than give people fixed answers (“you need 1 million to retire”) or roughly-customized answers (“you’ll need 60% of your pre-retirement income”) it would be better to educate them on what they’ll need. Encourage them to track their consumption, realistically plan how it will change in retirement, provide some easy-to-use monte-carlo simulation software and help them input their variables, and help them explain what the numbers mean (your savings will have a 90% chance of lasting you until you’re 90 years old).

This might make a good workbook too, you read through, follow the exercises about tracking and estimating your expenses, use some bundled software and come out with some truly customized, realistic retirement goals.

Obviously this would be a lot more work then telling people they need to save a million dollars (and many people wouldn’t be willing to go through the process), but I think it would be a great way for the financial planning industry to serve their clients.