When Is The Right Time To Stop Saving?

It has been drummed into us to start saving as soon as possible. But when is the right time to stop saving. Or should we ever?

Habits are hard to break, even virtuous ones. And life-long habits are even harder to break. Being a Singaporean Chinese, saving is a habit deeply engrained in my culture and DNA. From young, I was taught to sock away my ang-pow (red packet) money collected during Chinese New Year into a savings account.

When To Stop Saving?

So is there ever a right time to stop saving? There must come a time when we can just spend our income and not feel guilty about not saving anymore. 

The answer is…in retirement. The years spent saving for retirement is to ensure that we no longer need to save during retirement. If the planning is right, the prep work has been done.

Easier said than done. In my first 2 years of retirement, I was still setting aside a percentage of my income for, well, just-in-case. What if unexpected expenses crop up? What if medical costs sky rocket? What if inflation spirals out of control? For those with children, the worry is whether financial help is needed for perhaps the downpayment on their first home? 

Out-living one’s money is a nightmare and fear for many, ranking as the top concern for retirees. So, many continue to save instead of spending all of our retirement income.

Breaking It Is Hard To Do

Fact is, no one can be 100% prepared. The world, and life, can throw spanners to thwart the best-laid plans. That’s what emergency funds are for. If and when such instances occur, we shall respond within our limitation and resources. Attempting to build a bottomless pit to cater to contingencies is not a sensible solution, taking away time energy and opportunity costs. 

Fact number 2: no one can ever self-insure against medical costs. It will wipe out everything and pull the rug form under our feet. In retirement, medical insurance is the most crucial, more than life insurance. So it’s important not to over-insure on life at the expense of medical coverage. Once the right balance is in place, have the comfort to go ahead and enjoy life and not worry about such expenses. 

Shifting Gear

Being a life-long saver, I find it hard shifting from saver to spender mode. Not easy to slow down on the highway of habits where cruise control reigns, let alone complete stoppage. Saving is a habit with wonderful outcome to show for, making it tougher to stop.

The first month I stopped saving, I felt ‘exposed’ and ‘naked’ not having a safety net beneath. It was strange not seeing my savings account grow, something that had been a pride during saving years. 

I kept re-calculating my retirement sums to make sure there was no mistake or copy-and-paste error between spreadsheets. It was only after year-end review that I became at ease as all figures bore out as planned, confirming there was no need to set aside additional money. It finally felt good to spend my full retirement income monthly without thinking about saving.

Know The Purpose

One way to prevent the process from taking over the cause is to keep in mind the purpose. Know the ‘what’s’ and ‘why’s’ for the saving. Once reached, the need is fulfilled. Keeping this big picture in mind helps from being overcome by irrational fear and emotions.

Continuing beyond this threshold is to let other opportunities slip by. Opportunity to live more fulfilled and enriched retirement years, enjoying pleasurable activities, travelling and taking better care of self. All these lead to better mental and physical health and happiness. Money not spent in the form of excess savings is a waste of our life force. 

Re-Start Saving?

There are forecasts and then there is reality. Budgets can go off-track due to new realities. This makes it important to review retirement plan to take into account changes in costs, especially for planned big-ticket expenditures such as renovation and car upgrade. 

What about unplanned expenditures? Simply put, these are triggers to re-start saving or increase retirement income, whichever is appropriate. For example, my husband and I had not planned on buying a holiday rental apartment in Marbella. We are very clear about selecting the right type of investment property as part of risk management. However, Marbella swept us off our feet and after reviewing our investment checkpoints, we proceeded with the purchase by digging into our savings. 

In addition, the budget we had estimated for renovation was way-off because of pandemic-induced price hikes arising from logistical challenges and shortages. Even Ikea kitchens, the bedrock of cheap kitchens, went up by 30%! So we had to set aside some of the holiday apartment rental income as savings to plug the gap.

Any changes affecting budget is a signal to re-assess saving to ensure keeping on course of retirement objectives. Another trigger – and this is a biggie touching everyone – is inflation. In fact, inflation is the biggest threat for retirees as it is a silent robber of our money,  which makes it prudent to include inflation-hedged investments in our portfolio.

Let Go

Once the savings threshold is reached, trust in the planning, stop saving and enjoy spending our retirement income. By crimping on lifestyle to save for excess that will not be spent, is to squander time, health and life itself. For those who have children to bequeath, well and good. But even then, shouldn’t we value ourselves too?

Everyone’s situation and tolerance is different. Keep in mind the purpose to know when to stop saving. Then honour ourself by spending our retirement income, without guilt, to reap and enjoy the rewards of our harvest.

The price of anything is the amount of life you exchange for it. ~ Henry David Thoreau

 

Saver-turn-happy spender,

Savvy Maverick

(Main image: Katie Harp, Unsplash)

Disclaimer: The views expressed are drawn from personal experiences and do not constitute financial advice in any way whatsoever. Nothing published here constitutes an investment recommendation, nor should any data or content be relied upon for investment activities. Please seek independent and thorough research before making any financial decisions, including consulting a qualified professional. Data and information cited from sources will not be updated after publication.