What happens if you get to retirement age and realize that you saved too much? Believe it or not, this does happen and has its own set of problems. In this episode, we’ll explore those problems along with some potential solutions.

Stick around until the end of the episode to hear our listener question about deciding whether to do Roth conversions or take ACA health insurance premium tax credits.

Outline of This Episode

  • [2:32] Too much retirement savings does have its downsides
  • [4:54] What you can do to combat
  • [8:21] My thoughts on what you can do if you saved too much
  • [11:27] Choosing between Roth conversions and ACA

Saving too much has its downfalls

While not a common problem, saving too much for retirement can have its downsides. Higher tax bills and missed opportunities are a couple that come to mind.

People with multiple income streams like rental property income, Social Security, company pensions, and various investments can end up with a higher tax liability than they had planned. Some retirees have found themselves spending more on taxes to access their savings while wishing they had used the money for experiences in their younger years when they had more energy and enthusiasm.

Higher savings, especially in tax-deferred dollars, means increased required minimum distributions (RMDs) once you hit age 73. This can be combated by doing Roth conversions. Right-sizing your IRAs for smaller RMDs is one of the many reasons that Roth conversions are so popular.

Strategies for dealing with an abundance of retirement funds

There are a few strategies you can use if you find yourself with too much money going into retirement.

Give your children their inheritance earlier. Giving money to your children and loved ones when it can have the greatest impact on their lives frees you to enjoy your retirement fully without worrying about its effect on your heirs.

Give money as gifts. If you have oversaved and want to start sharing your wealth with family while you’re alive, you can give money as gifts. Tax laws have become more favorable for gifting, allowing you to transfer more wealth to your loved ones without penalty.

Work with a retirement tax specialist. Collaborating with a retirement tax specialist to create a customized retirement plan can ensure that you optimize your resources to ensure that you spend wisely and enjoy a comfortable retirement. If you are in the market for a retirement tax specialist check out this video and schedule a meeting to see if I can help you.

It’s not too late!

It’s not too late! If you think you’ve over-saved for retirement, explore the idea of retiring sooner or dropping down to working part-time as part of a phased retirement plan.

Another option would be to stop saving for retirement now and use that increased cash flow to start doing the retirement activities you look forward to now.

If you want to travel more, start a small business, or mentor young people–do it now before you stop working. Stop saving, take more time off, or drop down to part-time, there are many ways to put this into action, but its a great way to have your cake and eat it too.

Resources & People Mentioned

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