The goal of building a retirement nest egg is to use those saving to support spending in retirement.
Some savers never manage to shake the habit of saving, which could be bad for them and even their heirs.
How much is enough? That’s a really important question when it comes to saving for retirement. You can compare your savings to other people’s nest eggs or use a rule of thumb, like 10x your salary, but the answer to how much is enough is highly personal. If you don’t come up with an answer, however, you could risk having too much money, which could be bad for your retirement and your heirs. Here’s why.
In order to save money, you need to spend less than you earn. That’s simple logic, but the delayed gratification this requires is an important emotional skill. You are, in effect, willingly putting off the pleasure of using your money today so you can use the money in the future. Along the way, you hope to grow the size of your nest egg by investing your savings.
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Retirement requires a completely different mindset. You have to allow yourself to start spending. Some retirees find this difficult, so they remain in saving mode. If that sounds like you, you are at risk of having too much money. OK, that’s probably not a huge problem, but think about the implications for your lifestyle. If you can’t switch out of saving mode, you’ll likely stop yourself from enjoying the fruits of your savings, like eating out, trips, and spending time with friends and family.
In other words, you risk missing out on the whole point of building your nest egg in the first place. But there’s a secondary impact here because compounding is most powerful at the end of the sequence. You could end up with retirement accounts that are larger than you expect if you don’t spend the money.
Having too much because you can’t bring yourself to spend money could be an issue for you if you have a traditional IRA and/or a 401(k). These accounts have required distributions that begin after you reach the age of 73. The money you withdraw is taxable, and the income could affect the benefits you receive. That said, if your saving habit leads your estate to grow past the estate tax exemption ($15 million per person in 2026), your heirs could be hit with taxes on your estate when you pass.
You may not consider either of these two financial issues material, which is fine. But stopping yourself from enjoying the benefits of your savings in retirement because you can’t shift from saving mode to spending mode is a risk that you shouldn’t ignore. You didn’t put in all that work building a nest egg just to look at it; you saved so hard for so long so you could enjoy it.
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