The idea behind this post was triggered when my cash balance/defined benefit plan limit was increased one year from $15K to $30K (thanks actuaries!). My wife and I were adding up what we expected our tax-advantaged savings opportunities to beat that time.  Here was the total we came up with (note this was 2014):

  • $401K/Profit-sharing plan: $52K
  • Defined Benefit/Cash Balance plan: $30K
  • Backdoor Roth IRAs: $11K
  • HSA: $6,450
  • Individual 401(k) for The White Coat Investor: ~$40,000 (might be optimistic but book sales are going well)
  • 529s: $11,160 (that's just the tax-deductible amount in my state for the three kids)

Total: $150,610

We were also considering some unique taxable investments for perhaps another $20,000, which brings the total to over $170K, more than the gross salary of many primary doctors. As I've written before in Enough is Enough, I don't see saving/investing as a hobby to be done in its own right. It's serious business for me. I'm saving because I plan on spending later. Spending a lot of money really isn't that hard for us (We're No Mr. Money Mustaches as we contemplate $83,000 in home upgrades and buying a fancier boat while planning a trip to Europe.) So while I want to be financially secure and comfortable and never worry about running out of money, I have no desire to have an estate tax problem some day.

Am I Done Saving?

While running a trail around the lake near my house, I started thinking about whether it was possible to be “done” saving for retirement. You can be done when saving for lots of goals. When you want to buy a $30,000 car, you save up $30,000 and then you're done and you go out and buy it. It's a little harder for a goal out in the future. But let's consider one, like college. Our goal was to have in a 529 the equivalent of 4 years tuition at our alma mater for each of our kids. Well, there's $17K in there right now for each of them. Tuition is currently $5000 per year, so we've almost met that goal. But you also have to take into consideration the time value of money. If we assume we can make 5% real on that money between now and when the money is spent (8-15 years from now), then we're anywhere from 25% to 75% overfunded already, depending on the child. At this point, we can either stop saving, expand our goal (perhaps 4 years tuition at a more expensive school, perhaps tuition and living expenses, perhaps enough for grad/professional school etc), or take less risk with the portfolio.

How Much is Needed to Be Done Saving for Retirement?

Well, let's apply this same line of thinking to retirement. If I want to retire at age 70 with the equivalent of $2 Million in today's dollars, how much do I need NOW (at age 39) in order to be done? Let's assume a 5% real return. About $441,000. Well, I have more than that already saved for retirement, so I guess I'm done. Now I can spend everything I earn without fear for the next 31 years. Alternatively, I can keep saving and either live higher on the hog in retirement, take less risk with the portfolio, or retire sooner. At this point, I'm no longer saving for retirement, I'm saving for early retirement. Let's say I've got $750K in retirement assets and don't want to save anymore. At what age can I retire with $2 Million in 2014 dollars? The answer turns out to be age 60.

Truthfully, those who start early and keep the pedal to the metal throughout their careers are going to have gobs of money in retirement. Imagine, for instance, a 40-year-old with $1 Million already in retirement who saves $100K a year toward retirement then works until he's 67. At 5% real he'll end up with $9.5 Million, or enough to provide a retirement income of $375,000 indexed to inflation for the rest of his life. Now I'm pretty good at spending money, but I'd have to work awfully hard to blow that much money in retirement after kids are gone, house is paid off, and retirement saving is accomplished.

Here's a chart that demonstrates how much you need to be done. It assumes a 5% real return on your portfolio (that's after taxes and expenses, of course) and that you need $2 Million to retire. This is all easily generated using the “present value” (PV) function in a financial calculator or your favorite spreadsheet. Don't like my assumptions? Make your own chart. It only took a couple of minutes.


How Much Do You Need Now To be Done Saving?
Retirement Age
Current Age 40 50 60 70
30 $1,227,827 $753,779 $462,755 $284,091
40 $2,000,000 $1,227,827 $753,779 $462,755
50 $2,000,000 $1,227,827 $753,779
60 $2,000,000 $1,227,827


As you can see, the younger you are, or the later you plan to retire, the less you need now to be “done.” A 30-year-old who plans to retire at 70 can be done with as little as $284K. On the other hand, if you want to retire at 60 and you're already 50, you'll need over $1.2M stashed away before you can say you're (probably) done.

We can also look at it a little bit differently using the “payment” (PMT) function. Let's imagine you need $3 Million to retire and you have $500K and can average 5% real on your portfolio. How much do you need to save every year to reach your goal? Again, it depends on your current age and the age you plan to retire at.


How Much Do You Need To Save Each Year Given Your $500K Portfolio?
Retirement Age
Current Age 40 50 60 70
30 $165,487 $48,197 $12,027 ($4,100)
40 $165,487 $48,197 $12,027
50 $165,487 $48,197
60 $165,487


If you already have $500K, and you want to retire in 10 years, you need to save $165K a year. If you have 20 years, you need to save $48K. If you have 30 years, you need just $12K. If you have 40 years, you can actually take $4K out each year and still reach your goal.

One Thing To Beware Of

One issue with declaring yourself “done” saving for retirement and now spending more money is that you and your family will get used to a more extravagant lifestyle, which to maintain, means you'll need to save more money. $2 Million might be plenty of money given your current lifestyle, but if you then start spending $300K a year, you're going to have a tough time transitioning to the $80K a year, plus Social Security, that you'll get in retirement from a $2 Million portfolio. Also, it should go without saying that you should beware of your assumptions. If you assume 5% real, and only get 4% real, or if the high returns come early and the low returns come late (the sequence of returns issue), you may need a little more. So monitor things as you go along and make adjustments.

2018 Update

We updated this post for 2018, just before republication at Physician on FIRE. It's pretty interesting to go back and read it given how our income (dramatic increase), investing account structure (another 401(k) for my wife but most investments now going into taxable account), and spending (increased as noted in the “One Thing to Beware Of” prophesied) have changed over the last five years. Are we now done saving? Probably not, but a higher percentage of what we're saving is definitely going to be used for charitable contributions and our heirs!

What do you think? Are you done saving for some of your goals? Which ones? How did you decide you were done? Comment below!