Are You Saving Too Much?

Nevertheless, a small band of economists from universities, research institutions and the government are clearly expressing the blasphemy that many Americans could be saving less than they are being told to by the financial services industry — and spending more — while they are younger. The negative savings rate, they say, is wildly distorted.

According to them, the financial industry, with its ostensibly objective online calculators, overstates how much money someone will need in retirement. Some, in fact, contend that financial firms have a pointed interest in persuading people to save much more than they need because the companies earn fees on managing that money.

Actually, this is probably true somewhat. Most of the online calculators and financial planning literature says that you need to save one million dollars ($1,000,000) in order to retire comfortably. That may be true in California, but it is not true here in Oklahoma unless you are already a millionaire. You could probably retire on close to half that -- even assuming a return of 6% on your investment -- as the cost of living here in Oklahoma is much lower.

Even so, the real problem is that American's are not saving enough.

Such an idea would fly in the face of almost every exhortation to a nation of spendthrifts that saving more is an imperative. After all, even as people are living longer, corporate pension plans and Social Security can no longer be relied on to ease most Americans through their retirement years. Fidelity, the nation’s largest provider of workplace retirement savings plans, says the average 401(k) account balance is only $62,000.

Don't forget that doesn't take into consideration that Americans have too much debt on top of that. That is a greater problem than not enough savings.