FORTUNE — Are you saving too much for retirement? Can you believe I’m even asking that question?
Full disclosure: The folks at Morningstar Investment Management, specifically head of retirement research David Blanchett, asked it first. He found that for many people the answer is yes — by an average of 20%. That, as Blanchett acknowledges, is a big deal. “Retirement is, by and large, the most expensive purchase of anyone’s lifetime,” he says. “For people who think they need $1 million but find they only need $800,000, it is a big difference.”
So how do you figure out whether it applies to you? You have to take a step back and look at both the retirement saving goals you’ve set for yourself and your current spending.
There has long been a rule of thumb that says you should plan to replace 70% to 80% of your pre-retirement income (that is, your final annual salary before you retire) in retirement — and that that number should be adjusted upward, with inflation, each year. In real life, data from the Survey of Consumer Finances shows, spending, and therefore the amount you’ll need, isn’t that linear.
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People in their mid-40s to 50s spend the most. (As someone right in the middle of that range with one child in college and another starting in 18 months, I can totally see why that’s the case.) From there, spending starts to decline as — typically — the kids leave the nest, you downsize, retire the mortgage (although that’s getting less common), ditch the extra car, etc., etc., until medical needs drive expenses up again toward the end of life. Bottom line, the amount people need to replace varies from under 54% of pre-retirement income to over 87%.
For average earners, whose pre-retirement income is roughly $56,000, this is welcome news, says Michael Falcon, Head of Retirement at JP Morgan Asset Management. Their annual spending in retirement seems not to be escalating as previously thought from around $43,000 at age 65 to nearly $80,000 at age 90 (due to inflation); instead, it climbs only to around $50,000. Social Security can cover a significant chunk of that.
But higher earners — particularly those who earn more than the median income but below what the country considers wealthy — should be cautious before taking their feet off the gas. Their spending actually declines in retirement — but that still doesn’t mean they’ll have saved enough to cover it.
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“Having to save more is an affluent problem,” Falcon says. And here’s why: “If I make $200,000 to $300,000 a year, I’m probably spending a lower percentage of my gross income pre-retirement because of saving and taxes,” Falcon says. “I may be spending only 50% of my gross salary.” Still, because of the higher take-home, Social Security will not replace the same percentage of pre-retirement income. And taxes — including those on withdrawals from retirement accounts — will take a bigger bite.
Of course it pays to figure out if indeed you’re over-saving. That would free you up to use the money in the present, whether you put it toward defraying student loan debt for your kids or enjoying yourselves. Blanchett recommends a personal touch. “Nothing can substitute for spending five hours with a CFP,” he says. “But the percent of the population that will do that … is a definite minority.” For people who are not going to engage, utilizing the online tools and retirement calculators available is a step in the right direction.
And remember, one thing this paper shows is that this is not a one-and-done experience. Your spending is not static. Neither is your health, earning potential, or — even further from your control — the sequence of your investment returns. Even if you’ve set retirement goals and are working toward them, revisiting the process every couple of years will pay off. Not just in how you’re able to live in the long run, but in how you’re able to live today.