The Consequences of Saving Too Much for Retirement

David Ning

Financial experts spend a lot of time urging everybody to save more for retirement, because most people don't put enough away for their future. But on the other end of the spectrum, there is a small portion of the population that actually saves too much. There are no problems on the surface for these people, but over-savers may be missing opportunities here and now.

In a way, super-savers are just as lost as the people who aren't saving enough. Your money might do more good if you donated it to a worthy cause or even cut back on working so much to spend more time with family. If you are an extreme saver, try these strategies to reduce the negative effects of over-saving:

Develop hobbies and relationships outside of work. Our society has trained everybody to work hard and acquire more. Many people think more money will lead to more stuff and more stuff will make them happy, but the opposite is often true. It's not that stuff isn't great, but having to pay for it all just sucks most people into working longer hours. They end up forgoing what really makes them happy, which is spending time with people they like and doing the things they actually want to do. To get out of this cycle, you should buy less stuff and cultivate the relationships that matter most to you. Once you finally realize what really makes you happy, you'll feel less of a need to accumulate so much because it's just not worth the effort.

Consider your health if you are locked in golden handcuffs. Many people are saving too much because they simply earn a really high income. But is the responsibility that comes from a highly-paid position taking a toll on your health? You are being responsible by preparing for a long retirement, but you won't have a chance to live through it all if you are constantly stressed and become overweight during your working years. And even if you manage to survive for a long time, your quality of life will suffer if you have poor health in retirement, in addition to the financial costs of being unhealthy.

Make a solid plan if you are suffering from the one-more-year syndrome. Some people are able to retire comfortably but decide to hang on just a bit longer. There are plenty of reasons to work, but not if you feel miserable at your job. Instead of convincing yourself to work just one more year to beef up your nest egg, sit down and write out a financial plan. Come up with a detailed budget of projected retirement expenses, and see if you have enough to sustain your lifestyle. If everything checks out and you still have a healthy cushion, then quit the job already. You can't ever eliminate every risk out there anyway.

Recognize money for what it is: an aid that could possibly increase your quality of life. Money itself won't necessarily make you happy. Yet, many people mistakenly treat money as the goal itself. Why keep accumulating more by grinding the 9-to-5 if you don't have to?

More money doesn't automatically mean a better life for your children. There's the obvious potential that your children could squander what you leave behind. But even if you manage to raise responsible children who can handle the financial assets you leave them properly, your children will miss a big part of life if you leave behind too much.

Having more money isn't necessarily bad, because money is useful and having enough is extremely comforting. But there's an unparalleled experience that comes from earning the money with your own efforts. The self-assurance that comes with one's ability to accumulate wealth through hard work, persistence and intelligence is hard to replicate, and everybody should have a chance to experience it. By doing all the work for them, you might be robbing your children of ever having this deep satisfaction.

The future is unknown, so it's always good to be conservative with your money, but you can go too far. Make a carefully thought out plan to make sure you're saving enough, but don't save too much. Money isn't just for hoarding, it's for spending too.

David Ning runs MoneyNing, a personal finance site that shares money moves you can make to significantly increase your chances of having a comfortable retirement. He likes to share simple changes that anyone can make, such as picking the best online savings account and figuring out whether a 0 percent balance transfer credit card makes sense.