Americans, on a whole, spend too much on their retirement plans! That should get the keyboards pounding with objections without even going any further. Let me start with the exclusions: social security, unfunded corporate pensions and existing plans. That said, some people have stopped typing. But don't give up yet because I am sure that I am a rare voice in the wilderness that feels you are spending too much on retirement and not enough on your life. Now for the big caveat: this is especially true and directed to people who own their own homes. (You realize I am talking to you even if your equity is 1% and the bank owns 99%). My thinking is simple: pay off your house, whatever price it is, and that will be all the retirement you need! Now you can start objecting.
Why do I feel that way? People in my experience do not change their habits, lifestyle, or hopes and fears just because they quit working. My father who was in the garment business all his working life insisted we buy quality clothes because they would last longer. Expensive did not equate directly to quality. As a kid we shopped until quality really equaled value. When my father finally quit working (around 80) and had money from his house he sold that was paid off, he never stopped shopping for quality and absolutely refused to pay for expensive clothing even if it did equate to value. His lifetime of habits didn't change.
My friends in the travel industry tell me that although many people talk about extensive travel when they retire, if they hadn't traveled in their working years they generally take one or two trips and that's that. They do not enjoy the discomfort of normal travel and miss their life long routines. Does this mean nobody continues to travel? Absolutely not, but I am generalizing.
Let's take a running total to this point. You most likely will not change your shopping habits when it comes to clothing and other merchandise, and you probably won't take more trips than you normally take. Even though you put additional monies away in a retirement plan, those dollars earmarked for the aforementioned activities might not ever be spent in your leisure years.
Before we go any further I am a big believer in 401(k)’s because your employer matches some part of your contribution, and that is free money. If it is matched dollar for dollar I would maximize your investment every year, and if you don't have the money to do that I would take it out of my house. (Contradictory advice? Not really because you will have time to pay off your house while you may not get the matching opportunity again.).
Roger Schlesinger's Mortgage Minute is heard on hundreds of radio stations and daily on the Hugh Hewitt radio show and Michael Medved shows. Roger interacts with his hosts and explores the complicated financial markets in order to enlighten his listeners and direct them along their own unique road to financial freedom.