Are You Saving Too Much For Retirement?

Gone are the days of gold watches and full pensions, so most of us have to plan for our golden years by saving some of our hard earned cash.  But one researcher looked at how much is too much.

David Blanchett, of Morningstar Investment Management, found that many people are saving an average of 20 percent more than needed for retirement. For example, some might be told they need to have one million dollars in the bank by retirement age but they really need $800,000.

The long standing retirement rule is that you need to replace about 70 to 80 percent of your pre-retirement income when you finally decide to stop working. But Blanchett examined expenses and found that may be too much saving.

People tend to spend the most money in their 40s and 50s but spending declines once kids are out of college and mortgages are paid off.

So he argues that many people may only need to replace about 50 percent of their pre-retirement earnings.

If your average income is around $56,000 a year, social security will cover a good chunk of your likely spending over the age of 65. Those who earn more may need to save more if they want to maintain their standard of living.

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