Stop Putting Money in Your Retirement Plans

We have been trained from the day we started earning money to put some of it away for the future. For most of us, the lion’s share of this is saving for retirement. The government has given us many helpful vehicles to do this: Traditional IRA, Roth IRA, SEPP IRA, 401(k), 403(b), HSA and others.

We hear phrases like, “pay yourself first,” “put away at least 10% of your income,” “automate your savings and you won’t miss it,” among others. I have done all of this for many years. At times I was saving as much as 50% of my income. But there comes a time to say enough is enough and stop this behavior.

After many years of following this advice, we get to a place where we have a significant amount of savings. The reward for following this advice is to become wealthy. But once you make it to your “number,” what then? Do you keep on saving? If so, what are you saving for? Do you stop saving and start spending the money now? Can you give more away to causes you are passionate about?

At a recent conference, I was talking with my friend WealthyDoc (another doctor financial blogger) and this concept came up. I told him about a recent question in a group I follow, asking people what they did with their company 401(k) money when they left the company. I stated I rolled it into my IRA.

This comment generated some interesting discussion. The first talking point was, if you roll it into your IRA, then you can’t do backdoor Roth IRA contributions. But I pointed out that I don’t make any more contributions to any retirement fund. That generated some more comments. Even though I retired from medicine, I still earn money from speaking, selling books, financial coaching, and rental income. So I should be using that earned income to contribute to a retirement plan such as an IRA or 401(k).

Yes I do still earn money. Yes I can still make contributions to retirement plans. But, I’m financially independent now and don’t need any more money in my retirement plans. Should I just keep up the same old thing and keep contributing anyway?

WealthyDoc and I discussed this late into the night, long after the conference was done for the day. He too was in such a position that he could choose to contribute or stop contributing to his retirement plans and it will not make any difference in his retirement anymore. He and I both had passed the point of enough. When you have enough, should you keep adding more?

John D. Rockefeller was at one point thought to be the richest man in the world. He was asked how much is enough? His reply was, “just a little bit more.” If the richest man in the world didn’t think he had enough, what does that say for the rest of us? Can one ever reach the status of “enough?”

Charles Dickens wrote about this issue and used his character Ebenezer Scrooge as the object lesson. Scrooge was saving way too much money for the future. He didn’t use enough of it for his present needs. He kept his office too cold to save money on coal so he could put more money away. He paid his staff too little so he could put more money away. He did not give to charity so he could put more money away. Yet he already had enough.

We can look at a character like Scrooge and laugh at his decisions. But when we make the same decisions, somehow it seems different. We are not like Scrooge. Or are we?

I retired from my 20 year surgical practice in 2013.  I continued to work as a locum surgeon for another three years. I still work as a financial coach and author. I am still bring in earned income so I could still be contributing to my retirement plans. But I already have enough in those plans to take care of me for the rest of my life. That is why I had the ability to leave medicine in the first place. So should I keep pouring in more money?

My choice was to stop putting anything else into my retirement plans. I already have enough. By not putting it in these vehicles, I do pay a little more tax. I also have a little more money available for my use now. Since I already have the future taken care of, I would like to spend the rest of the money in the present and not continue to stockpile it for the future. For me, the future is now.

I discussed the issue of determining your finish line at the end of my book The Doctors Guide to Eliminating Debt. But what good is figuring out your finish line, if you don’t do anything differently when you reach it? When you finish running a marathon, you stop running after crossing the finish line. How silly would it be if some of the runners kept going because they wanted to get in another couple of miles? When they wave the checkered flag at a stock car race, the racers head to the pits because they know the race is now over.

Why are we unable to use the same mentality when we cross the finish line of our retirement savings? The finish line means you can stop racing. When you hit your retirement number, you can stop saving.

Just because I stopped putting money into my retirement plan, doesn’t mean it stops growing. I picked out one of my accounts to see what happened to it since I retired. That account is up 44%. It won’t be long before the retirement money has grown to double the value it was when I stopped working. So once you cross the finish line, if you still are working, but not contributing anymore, the account will continue to grow.  It’s like you stop racing when you cross the finish line, but your money keeps on going.

This same thing applies to disability and life insurance. Once you cross the finish line of needed wealth accumulation, you do not need those insurance policies anymore. You are self-insured once you are financially independent. But I have a hard time convincing people to drop those policies, for the same reason I have a hard time convincing people to stop adding to their retirement plans. Old habits die hard.

Will you be able to stop saving once you reach that point? If not, what will be holding you back? Think of all the other things you can to with the money now that you don’t need to save it for the future. You wouldn’t keep sending money to the bank once your mortgage is paid off would you? Isn’t that almost the same thing?

There are so many good things you can do with your money once your stock pile is large enough to cover your future. You can go on more expensive and longer vacations. You can take more time off. You can see fewer patients. You can take less call.  You can work fewer shifts. You can make donations to causes you feel passionate about. You can help out other less fortunate family members. You can pay for your kids’ college education. You can contribute to you grandchildren’s’ college fund. There are so many good things to do with the money you used to put into your retirement accounts.

I hope this will plant a seed in your mind to consider what you will do when you cross the finish line of retirement savings. Make those plans now. I stopped racing when I crossed the finish line and headed for the clubhouse for a drink. If you want more information on retirement, pick up a copy of my book The Doctors Guide to Smart Career Alternatives and Retirement. See you in the clubhouse.

Share this article:

64 thoughts on “Stop Putting Money in Your Retirement Plans”

  1. I see your point, but I will echo PPB that the finish line is not for saving is not nearly as discrete as the finish line for a marathon (btw, some of the ultramarathoners pick up their medals at the end of the race and keep running).

    Even assuming that we have “enough”, we are both still working and earning into the highest tax brackets. Placing money into retirement accounts allows us to reduce the amount of tax that we pay now with the hopes that when we take it out later, we will be paying income tax at a lower rate.

    What I would say is that we are investing much less aggressively than we were 5-10 years ago and have loosened the pursestrings to a considerable degree. And, of course, we are keeping a large stash of cash in case of emergencies and such.

    • VagabondMD thanks for your comments. Enough is hard to judge, but we should make an attempt. There should come a point where we have more than enough and then instead of stockpiling more money, we start using it for something good now. Best of luck to you.

    • One scenario is that you actually find yourself in a higher tax bracket in retirement. The mandatory minimum distributions for your non ROTH accounts can be sufficiently high to push you into 35%.
      This also reduces your social security check, increases your Medicare premiums, and increases your capital gains rate (for both you and your spouse)

      That is in current conditions. Who knows what will happen with taxes for the wealthy in the future especially if the Dems get in.

  2. Congratulations on getting to the finish line! It is good you were able to keep yourself from the habit of a few decades (contributing to the retirement accounts). Most people would just go on- since (1) how much we need in retirement is not written in stone- unlike a race, where the finish line is the finish line (2) as long as one is living comfortably enough, what will you do with the money? Do you spend/give all that you make now?… which is reasonable if you’re semi-retired and working for the joy of it. Or, since you’re not putting any in retirement accounts, the extra goes into the taxable account? (3) the extra going to the taxman by not utilizing the tax advantaged space.
    The right answer is different for everyone. The point is, everyone can get there by doing the basics right.

  3. Dear Dr. Fawcett,

    I too have been practicing medicine now entering my 25th year of practice with the same hospital where I started following residency training .
    I have always enjoyed practicing medicine and being a part of what I consider a very professional and didicated team of doctors who are compassionate about the care that they provide to our community.
    As a non-surgeon, non-specialist, I have spent the majority of my career earning significantly less than what the average doctor at my hospital makes, and haven’t had the opportunity to achieve financial independence, and with a stay at home wife plus 3 needy children, 2 now in college, I doubt that I will ever reach financial nirvana.
    However, recent years have smiled upon what I do, in a financial sense. With the high demand for hospitalists in our region, compensation has improved dramatically and I now am experiencing a taste of what financial independence might offer.
    I, however, have an aging body, and despite the higher wages, my ability to work long stressful hours running back and forth to ER and to code blues might be limited.
    I am hoping to get another decade of work out of me, but my body may have other plans.
    I have put money away in 401 K, 403 B and 457 B plan at work, and have a modest nest egg. As I type this, a news announcement just sounded suggesting that the S&P futures are up 30+ points and Dow over 200, which is great, but after nearly 2 months of getting hammered by the market, I have lost a bit of convidence keeping my life savings exposed to much volatility.
    My thoughts, with the Trump tax bracket adjustments good for the next 8 years, I might start moving money out of my retirement plans ( I will be 591/2 in 1 month) starting in 2019 and yearly, in equal increments over next eight years so that I may fund a million dollar whole life insurance policy.
    I have a smaller whole life policy and so do all of my family members. I find them very useful as financial tools, providing a tax free way for our savings to grow, with steady growth over time and a shelter from stock market volatility. I also find the feature of borrowing money using cash value of policy as collateral amazing. I borrow $50,000 or more, yet that $50,000 cash value of my policy continues to grow while I gradually pay the loan back over what ever length of time I choose.
    My smaller policy helped me with closing of three rental properties that I purchased 5 years ago, and I could only imagine how useful a million dollar policy might be with financing purchases of any type.
    I plan to continue making maximum contributions to my 403B and 457B.
    However, having a pension, social security and RMD’s all getting taxed at rates that will only likely be higher in future years, does it not make sense to protect at least a portion of your wealth in a whole life insurance policy that grows tax free, without any stock market volatility concerns, and allows one to borrow tax free while amount borrowed continues to grow in policy undeterred?

    • You do not need to take your money out of your retirement plans simply because you don’t want it in the stock market. Just change what the money is invested in to something like bonds or CDs and it will continue to grow tax free. Please don’t buy more whole life insurance, it’s a poor choice, especially as you enter a time when you will no longer need any life insurance. If you take the money out of your 401k, you will be taxed. Then if you buy whole life, you will pay a huge commission and it will grow slower than it should. Those two things will be a huge, unnecessary cut in your savings.

  4. Peeps keep putting money in because they figured out how to do that. They don’t take money out (or keep money out) because they haven’t figured that part out. Deflation is more complex than inflation and it takes some work to understand and nobody has a book on that. BS formulas like 4 x25 are BS formula. The books are all about getting rich not about a controlled means to get poor once again without running out of money before you run out of life.

  5. Great advice for the entitled 0.01%. Must be nice to be in a high paying specialty. Try being in a lower paid specialty where people reduce their schedules and get paid even less, just to survive life in the trenches.

    • Lesie, thanks for your comment. I wasn’t getting a high pay for my specialty. I lived in a depressed area with a lot of uninsured patients and I took a lot of time off. I made the average income for all physicians over my career. In fact, the new surgeons who the hospital brought on, made more money in their guaranteed first year salary than I ever made in my best year. I didn’t do anything special or make a high income for physicians. I started saving when I started working and put the maximum amount every year into my retirement plans. My wife and I lived on half of our income during residency. I paid off my debts early and lived debt free after that with a nice but reasonable lifestyle. I bought investment real estate after I become debt free. I didn’t do anything special. I followed the same plan that is recommended to everyone. The problem for most doctors, is they don’t actually do this stuff. They don’t max out their retirement plans, they carry debt their entire life, they spend all their money every year, they take money out of their retirement plan for things other than retirement, or they give half of it away to a divorce. These are the most common stories and I’m trying to get people to do it better so they can cross their own finish line as well. Even the low paying medical specialties earn more than the average American. But the average American doesn’t save much for the future either. We can collectively do better than this. Spend less than we make, save the difference, and do it for a long period of time.

      • Dr. F and Leslie,
        I am on the wrong side of geoarbitrage, living in a low reimbursement, high cost of living area and I’m a pediatrician that finished residency at 37 (medicine is my second career). My wife, also a pediatrician became disabled and had to stop working in 2015. By living below our means and aggressively eliminating debt, we are on track to have a retirement lifestyle that will be the same as our working lifestyle. So, Leslie, I would say that you can meet your financial goals. Get a coach, read some personal finance blogs. Check out Dr. Fawcett’s books.
        If we want to save the planet, we need to use solar and wind for electricity and electricity for transportation. In the meantime, put a LED bulb in your fixture. The point is, conservation (living below your means) is as or more effective for conserving resources (money) than making more electricity (having a higher income) Peace.

  6. Lucky me – forced to join a retirement plan entering practice and enjoyed the practice so much, I didn’t retire until age 75. Money was never the subject as we both were savers and had nothing to start so we saved more than “enough”. After retirement realized I enjoyed our life style – plenty of travel and 4 daughters – all finished with college (& med sch) we payed for. In evaluating and realizing we had more than enough – also realized happy with our life style – did not want the yacht, plane, bigger mansion, etc. Large charity donations gave lots of pleasures and then trusts for kids and grandkids. Now 88 – but how can you ever figure on getting to that when figuring “enough” ? Summary – if you enjoy your occupation – it is not work. Earn, save, invest (as we do not know the future), figure “enough” and do what makes you happy when you get there.

  7. In the rare situation that a person was a “super saver” and made maximum contributions to a 403b plan and 457 plan for over 20 years and plans to retire after age 70.5 years when receiving RMDs and maximized Social Security, what strategy do you recommend to minimize income taxes when these funds are withdrawn?
    How much to rollover into a Roth IRA each year taking account of RMDs and Social Security payments?
    Thank you for your thoughtful advice!

    • David, that is too big of a question, with to many variables to be able to answer in the comment section of a blog post. Sounds like a good idea for me to do as a blog post in the future. Thanks for your question.

      • Looking forward to your advice in your blog post in the future!
        Please also send me an e-mail notification of it, so that I will not miss it.
        Thank you again for your wise financial advice!

  8. You are deferring taxes now but will have to pay when you withdraw that money and you do not want to die before that.
    at some point you should start spending and stop saving.
    I agree with Dr. Fawcett.

  9. Despite not being blessed with kids (also divorced for > 10 years), I continue to pay for term life be/c as I understand it, the benefit will go directly to my nieces & nephews without having to go through probate, the courts etc. I intend to to leave my property and other assets to charity.

  10. If you have extra in IRA there are some tax advantages to donating stocks directly to charity and the charity liquidates them – potentially increasing what you are actually giving them

  11. Spending habits are hard to change as you get older. Many retirees find it hard to change and spend and keep saving. But we must be aware that we have limited time , there are less years in front of us than behind us. Saving money is good but not at cost of time. Because we’ll always regret an unlived life .
    Like someone said that saving money for old age and not enjoying it , is like saving sex for old age.

  12. Dr. Fawcett, the best way to accumulate money is to defer taxes and that’s what tax deferred retirement plans are. Why would anyone pay more taxes unless you consider the U.S. treasury to be a charity? Qualified charitable contributions can be made from an IRA, also early distributions if they’re amoritized and as can excess distributions after age 70 1/2. Perhaps I missed something in post graduate business school and finance that you could explain.
    All physicians can benefit from learning basic finance such as discounting PV or calculating FV.
    Curtailed retirement plan contributions in conjunction with decreasing real income for most physicians restrict your advice to a few and I don’t think it’s best even for them. The ability to compound money tax free will allow more giving, larger estates or more spending, whatever you desire. The very definition of saving is deferred consumption.

  13. Agree with JL. No reason why you still can’t do Roth IRA conversion from an IRA. With tax brackets lower for high earners (at least for 2018), conversion of at least a portion of IRA money over time might make sense for many with large sums in their IRA or 401k. Taxes may go up in the future. So my excess income/savings outside of a tax advantaged account can be used to pay the taxes on the conversion. When I have to start taking MRD’s, it’ll be nice if most of that is coming from a tax free IRA. Plus, there are no MRD’s from Roth IRAs during your or spouse’s life. For money left in the regular IRA, I can satisfy the MRD with a charitable contribution made direction from the account… and not pay taxes on that portion. I think you can also contribute directly to a donor advised fund and then create a charitable legacy that way.

  14. I agree with this mindset, but I worry that health expenses in the future are unpredictable. We cannot assume that Medicare even with a supplemental plan will cover all expenses. The government could change Medicare in a way such that you could spend down your retirement and other savings pretty quickly.
    I don’t believe in sacrifing now if you don’t need to. You may not even live long enough to enjoy your retirement savings. My non-physician father passed away at 73, 2 months before his retirement. He did not get to enjoy most of his retirement savings. He also did not get much from social security as he had elected to delay when he started receiving SSI. This was a net loss, the gamble that he had taken. Yet, he lived with the peace of mind knowing that he would be ok once he retired as well as not be a burden financially to his family if he used up his Medicare benefits in a nursing him. His savings would cover home care or more nursing home care for at least a while. He would not be a burden to his family.

  15. “Nearly half of families have no retirement account savings at all,” the Economic Policy Institute (EPI) reported, even in savings vehicles such as IRAs and 401(k)s. According to a 2016 GOBankingRates survey, 35 percent of all adults in the U.S. have only several hundred dollars in their savings accounts and 34 percent have zero savings.

    I suspect the audience for this post is the minority of financially responsible who have reached their wealth goals. Perhaps the true title ought to be, “Stop Putting Money in Your Retirement Plans after You have Reached Your Goal.”

    The post also uses a lot of “I” pronouns. I assume the “I” is extrapolable to the inclusive “we” of the family from the consideration of family stability, security and wealth. My first object of saving isn’t for myself or what I may buy with each dollar, but rather an objective of achieving financial stability and security for my family. The concept of “family wealth” is part of this as achieving financial goals serve as the foundation for the next generation and that generation’s for the subsequent and so on.

    Indeed, I have always been a part of the family’s financial discussions–good, bad and indifferent. I’ve never thought of money as my money or my parents’ money but rather the family’s money to be used for objectives which benefit the family. Even today, as a middle-aged man with a family of his own, my parents will say, “How are your finances? Do you need any support? You know it’s your money. What we have achieved is for you and your sister.”

    Since I left home after high school graduation, I have only rarely taken them up on this offer (and those times were when I was a student living on Ramen noodles). Being involved in the family finances from the cradle conferred upon me a tremendous sense of financial stewardship of the family’s resources.

    • Dr Raj, well said. Thank you for taking the time to comment. Yes, so few doctors are actually saving any money today. They blame student loans and other outside factors, instead of blaming their our spending habits. I’ve set out on a mission to try and change those statistics. We doctors (and everyone else, but I’m speaking to the doctors) need to get out of debt and save some money for our and our children’s future. We can do it. Yes, your title idea is more complete, but that is just too long. The title has to be short and still get your attention. A trade off must be made.

  16. Good for you, not everyone can achieve the same because of students loans, illnesses, and other factors. But be careful with the message.
    You say that because you already had enough money you could leave medicine? Well, I hope then that the only reason that you studied medicine was not for the money.

    • Pablo, Everyone will leave medicine at some point. We can chose our exit time or someone else will choose our exit time. I put in 23 years after residency. Mostly I left because I found a new mission. Now instead of helping patients, I wanted to help the doctors so they could better help the patients. Thus the book series and the blog and the one on one coaching. Reaching my savings goal was the thing that gave me the courage to step out of my full time job and pursue a new interest. I’m not sure I would have left medicine, without the new interest. I’m teaching doctors to become financially independent so they can practice medicine on their terms and life a happy life. A life not tied to the need to earn money to pay bills, or the student loans. Then you can truly work because it’s what you want to do.

  17. I am not aware of anything that prevents you from converting IRA funds to Roth IRA funds if the IRA funds were rolled over from a 401k. You have to pay taxes, but I think you can still roll them over.

    • Rolling 401k to IRA increases taxes on Roth conversion, including backdoor Roth, due to pro-rata rule.

      If 401k has good low-cost funds, and you have pre-tax money in IRA’s you might want to convert to Roth, it might make sense to keep 401k.

  18. It has been a while since I posted to this forum. I still practice because I like the intellectual stimulation, but fortunately I do not need the money. When i turned 70 a year ago, several things positive things happened:
    1. I took maximum Social Security and my wife has continued to draw reduced Social Security.
    2. I stopped contributing the maximum amount to my SEPIRA ($54,000 annually) and I began to take a Required Mandatory Distribution; I take out more than the RMD, but less than the dividend income.
    3. I continue to receive my military pension and my VA Compensation from prostate cancer as a Viet Nam veteran with possible Agent Orange exposure.
    4. We are able to meet our living expenses, except Income tax, from my military pension, VA Compensation, and RMD. The Social Security payments go to our Money Market Account and my practice income also goes to my Money Market Account. WE have increased our money in this account to cover about a year of living expenses.
    We have more than sufficient income to support a nice life style. The two most important financial decisions I have made are to open a SEPIRA in 1986 and purchase McDonald’s at $5.75 per share and I hove continued to hold this stock and collect the annual dividend which was just raised to $4.64 per year or an annualized return of 80%. The second best financial decision was to stay in the US Navy so that I could retire from the USN at age 49 as a Captain with a nice pension.
    There are lots of ways to become Financially Independent, but this is how I did it.
    Ben Carey MD

  19. Hypothetically let us you won a lottery. Now you have enough to do what you really want to do. What would Nyla do stop working and spend the money. Now let see in a practical point you can count how many are independent after 10 years. Not what you are saying works only when you are working and generating income otherwise it does not work.

    Money does nit bring happiness. But it does bring independence which is very important.

    • The difference about winning the lottery is it is instant wealth. The finish line I’m talking about is one you have planned for and have been working towards for many years, and you finally get there. Then what do you do? Instant wealth, like winning the lottery, comes with its own set of problems. Most of those people are worse off in a few years than if they had never won the money. Thanks for commenting.

  20. Congratulations Cory on your humble brag. I, too, reached a critical capital mass 5 years ago at the age of 45 where I semi-retired from medicine, and when I stepped down, colleagues asked me how I managed to do so. When I explained how I invested, colleagues started asking me if I would invest for them. Hence, my career change to investment advisor at a fiduciary level.

    It is my experience that most of our colleagues (even the higher paid specialty colleagues) do not have nearly enough saved to comfortably retire. In fact, it would be irresponsible to tell colleagues to stop saving for retirement unless you’re willing to reveal under what criteria you issue this recommendation. Granted, if you’re not licensed as an advisor, the 1st amendment lets you say anything you want, much like how the anti-vaxxers and other fringe non-medical population are allowed to say whatever they want about healthcare. Let’s raise our standards, here, though.

    I can name several reasons why it would be a good idea to continue to save for retirement as long as you’re qualified to contribute. I myself continue to contribute even though I’ve technically reached critical capital mass. It is true that there is always a choice of saving under a retirement plan or saving outside of a retirement plan; I know people who have eschewed retirement plans and other plans subject to the whims of regulatory change, instead trusting private plans using a combination of insurance products and other non-grid vehicles, however, they still save and invest. Warren Buffet, someone who arguably need no longer save nor even work, still puts in 12 hour days at the age of 88 because this is where his passion is. There are many reasons to continue to save. Saving within a retirement plan vs saving outside of a retirement plan each has advantages and drawbacks, and one size does not fit all.

  21. Hello Cory, ….(edited out)…. My point being, you must live the lifestyle that you worked so hard to achieve, while you have the physical/mental ability to enjoy, and that means NOW. Leverage that MD degree to the hilt! Borrow for those vacations that you always wanted to go on. Buy that “Doctor’s mansion” that you have always dreamed of. Drive that fancy race car FAST. Live the most hedonistic lifestyle that your morals allow. Life is too short to not allow for some fun in the sun. Saving for later is overrated! (one caveat, never pass on matching contributions by your employer. That should be considered part of your “employment package”) DG

  22. I think this more than about the money. It’s a mindset. It’s about changing from the hard charging, work all the time, delayed gratification mentality to living for the moment. I’m 58 and I’m planning on working for many more years but at a slower pace because I enjoy medicine. There comes a time when your contributions to your savings are minuscule compared with the returns on the money you’ve saved. That’s when enough is enough. It’s time to live before you get sick and are unable to enjoy all that you’ve worked for. This is a wonderful article.

  23. If you’re retirement accounts are good, and you are earning enough money to meet your needs/desires and you still have leftovers, I don’t see a problem with padding your retirement accounts. But if you’re feel the need to “sacrifice” spending in order to pad those accounts, then that would seem unnecessary. But what if one stopped contributing to retirement without being FI yet? What if they planned on continuing to work, earning enough to meet their needs, and letting accounts compound until retirement age? Would it be too risky to rely solely on market returns? Would it be too risky to not make hay when they can? Would it be worth it for the sake of working less, more time off, etc. at an earlier age?

  24. If all of us were making six-figure or seven-figure salaries, and generous pensions that are tied to inflation, them many of us would do the things that you are saying but that is not the case.

    I can think of a better example than Rockefeller and that is the Koch brothers and all the other wealthy people who got the tax breaks for the last 38 years. They are always screaming about being taxed to death. If that was true, then how come I don’t see more of them out on the streets?

    • I tend to read articles about the Koch’s and their advice for success. I’m unaware of either of them doing any screaming.

  25. For me, it has been “baby steps” after reaching FI. I cut my disability insurance down to half coverage (even that took an entire week of obsessive over and over again mathematics and debate with my husband…) and just this past month I cut my monthly investment contribution to 1/3 (only the tax deductible “RRSP”- not sure what the American equivalent is…) I’ve just given up my hospital duties and shifted to only office practice (at age 43) thanks to reaching FI. These other changes were logical (but very difficult…) next steps. Thanks for yet another blog post that has reassured me that my thinking is on the right track!

  26. I am guilty of this. We are FI, but we both still work and still pile on the nest egg, for three reasons:

    1. Like Rockefeller suggests, you never really know how much is enough.
    2. We remain in a high tax bracket, so by placing the funds in the retirement accounts, we can pay tax on it later, likely at a lower tax rate.
    3. Most importantly, we have enough income to meet all of our basic expenses, and live pretty well, and have a kid in college and still save for later.

    I have cut out disability insurance and significantly decreased my life insurance. My wife only has the life insurance that her company provides as a benefit (3x salary). So we are moving in the right direction.

    Ultimately, once you have the saving habit, it is difficult to just shut it off. As we draw down our jobs (I am part time, my wife may retire as early as 18 months from now), it will be a different story.

  27. Thanks for the honorable mention, Doctor.
    That was one of many wonderfully thought-provoking discussions for sure.
    I’m focusing mostly on investment real estate outside my “retirement” accounts. I want to build up my rental income streams.
    One day -when I grow up- I want to be just like you! I feel like we are kindred spirits. I’m just a few years behind you. Thanks for lighting the path ahead for many of us.
    Or maybe I should be thanking Carolyn for all the stellar advice she has given you over the years!

    • You got that right about Carolyn. Much of our wealth accumulation is because of her. She spends very little, keeps me from spending too much, and she made us save a lot. The right spouse makes a big difference.

  28. Thanks for the article. I think those who are at FI continue to save because we experienced something in the past that went wrong. It is because of the memory of a misstep that we can’t let go. We lived a life with deep imbedded habits developed by experiences both good and bad. It is good to save, it is bad to spend has been the MO. It is tough to move out of the fear zone. Thanks for stirring the pot. I might even stop at Starbucks today for a mocha.

  29. I crossed that line years ago but kept working at a job I enjoyed. I’m retired now and only work a day a week but I still contribute to a ROTH and we still spend all we want, but that is less than a third of what we could afford to spend. You seem to be making the point that your spending should be based on your ability to spend. I prefer to think spending should be based on what we want to spend. What is wrong with handing down a legacy of wealth to our kids while living the life we enjoy?

    • Saving more and handing down a legacy is good, but not if it interferes with living a good life now. I’m not making the point that your spending should be based on your ability to spend. I’m saying your living should not be restricted by your desire to save. Some of us have saved much more than we need and you are right, there is no reason just to spend it because we have it. Have you thought of handing out some of your legacy now, instead of continuing to stockpile money you don’t need? I’m sure your descendants could use it now instead of 20 years from now. Then you could see what effect your estate will have while you are still alive.

      • Actually I just wrote a post about that(haven’t published it yet) and I’m interested in what my readers will weigh in with. I see good and bad, the good being what you stated about my kids needing money more now than later but the bad is risking turning our relationship into something financial, building expectations of an income stream that might not be reliable, reducing their incentive to succeed on their own and the lost opportunity cost of me investing it for them for their retirement instead of them potentially spending it unwisely. I’m not really sure yet.

        • My father set up trusts for each of us (4 daughters). 2 have used the distributions to help their kids or have a little better quality life. One needs the distributions for health problems that don’t allow her to work a lot. The last one tried to break the trust to get all the money at once (didn’t work). It really all depends on the individuals.

      • WCI talked about a 20’s fund. That seems a good idea to me. I told my sons it was for weddings, travel, grad school extras, legal fees, auto repair/replacement and large needs that contributed to a healthy, happy life. When the fund for each is done, it is done. That has worked well. One child tapped his early. His thrifty brother would not tap his until an extreme emergency arose. He does not feel any sense of unequal treatment because both understand the rules of the game. It makes me feel good to help in real ways when they need the money in young adulthood. I also don’t feel like the bank of Mom because 1) they have never acted in ways that would suggest that and 2) the rules and amounts were clear and in place before anything was needed.

  30. The concept of Enough is challenging but once you master it you can really find true happiness. Enough and contentment/happiness go hand in hand.

    I too plan on rolling my 401k into an IRA when I leave the workforce for good. The rationale is that I can lower expenses considerably (my 401k plan has multiple layers of fees that can erode my nest egg far more than the loss of backdoor roth IRA benefits can make up).

    Plus I have an infinite number of investing options outside of my plan rather than the limited scope they provide (although I will likely stay with the exact same investments as they are vanguard index funds (funds which I petitioned the plan to add several years ago and was successful).

      • Why wouldn’t you want the tax deduction is a good point. It is good to get the deduction. But if you put the money into your retirement plan to get that deduction, you can’t use it for other things now since it is stuck in the retirement plan. What if you gave the money to charity instead? Then the money is also not available for your use and you still get the tax deduction. My point is to realize that at some point you have enough in your stockpile and maybe you should consider another option for the rest of the money you earn. Sometimes we get into a rut and just keep on doing the same plan, even though our circumstances have changed.

        • I do agree with Dr Fawcett. Go and do what you like to do most in retirement. Spend your money for travel , for your children /grandchildren ‘s education, or donate it .
          Regarding tax deduction you can invest in real estate . Or be a politician . The sky is the limits.


Leave a Comment