Are We Saving Too Much?
Warnings about the need to save more for retirement are ubiquitous — and for good reason. So a suggestion that challenges this premise will raise more than a few eyebrows. And hackles.
Yet that’s precisely the suggestion Matthew Heimer makes in “Americans Are Saving More for Retirement: Are They Saving Too Much?”, a recent piece appearing in Fortune. Heimer acknowledges the reaction such a premise is likely to evoke, and asks readers to think beyond their shock before they “spit out their coffee over the on-the-surface absurdity of that question.”
Heimer points out that a large and growing number of retirement plan sponsors are adopting auto-enrollment and auto-escalation, and cites a recent Aon Hewitt study in which 23% of U.S. workers said they increased the amount they put into their retirement plans last year.
Heimer does not dispute that these are positive trends. The problem, he argues, is that the emphasis on saving for retirement may be so great that it impairs one’s ability to save for other worthy priorities like home purchases and tuition.
The result, Heimer says, is people resorting to withdrawals from their retirement accounts or plan loans. He suggests that Aon Hewitt provides proof of this in its report, which found that by the end of 2016, almost one-quarter of those with 401(k)s had taken loans against their retirement account balances.
To Heimer, there is a silver lining: All generations but one — Gen X — are saving even more this year than last year. In so doing, he says, the Gen Xers, defined as those born between 1965 and 1980, are doing exactly what they should, since they are the group currently in the hot seat to the greatest extent to pay for mortgages and tuition. “Kudos to them for recognizing” that they are part of the group “that should be putting their eggs in more, and different, baskets,” he writes.