Saving too much for retirement

NEW YORK (Money) -- Question: I am 31 and have $200,000 in savings. According to the savings calculator on your site, I need to save only about 6 percent of my salary, assuming I make around $80,000 a year.

I know I'm an extreme saver and I plan to cut back this year because I have a kid on the way. But 6 percent seems really conservative to me. Would that really ensure a comfortable retirement? - Nick, Overland Park, Kansas

Answer: The reason our "What You Need To Save" calculator has come back with such a low savings rate in your case is that you've accumulated so much dough at a relatively tender age. Extreme saver you are, you've tucked away more than twice your income and you're barely in your 30s. Which is great. Saving big time early in your career vastly increases the odds that you'll have a large enough nest egg to fund a nice long and comfortable retirement.

But remember: The aim of our calculator is to give you a rough sense of whether you're on track toward a secure retirement given your situation now. It's not a prediction of future success or a guarantee that you'll have all the moolah you'll need come retirement time.

You've got a lot of time before you'll call it a career. And a lot of things can change over that time.

Maybe you won't be able to keep up your extreme savings habits (kids definitely make a difference, as you note).

Perhaps you'll have years where you won't be able to save because of a job layoff or because of the expenses of raising a family. It's even possible that you could be forced to dip into your savings to cope with a financial emergency.

You've also got to keep in mind that this calculator, like any other dealing with a complex and ever-changing process like retirement planning, has a lot of assumptions built into it.

For example, the calculator assumes you will live off 80 percent of your pre-retirement salary less the amount you save.

So if you're earning $100,000 before you retire and saving $20,000 a year, you're living off $80,000. The calculator assumes you'll need 80 percent of that, or $64,000. That amount will then be adjusted for the cost of living each year to maintain your spending power.

There are also a ton of assumptions about investment returns, inflation, retirement age, etc. (To learn more about the methodology, check out "National Savings Rates Guidelines for Individuals", the article on which our calculator is based.)

All of which is to say that after plugging in your numbers and getting an estimate of how much you must save, you've got to decide how closely you want to follow it.

If you think you might want to spend more money in retirement with lots of traveling, a vacation home, and spoiling the grandkids, then you'll probably want to save some more than what the calculator spits out. Or maybe you're just a conservative sort of guy who feels more comfortable having a bigger cushion.

On the other hand, maybe you figure you've got the wind at your back with all that dough set aside, so you feel confident you can spend more and still be assured a secure retirement, in which case you can cut back your savings effort.

My advice: think about the way you live now and whether you're comfortable with that lifestyle or would like to change it. If you're truly an extreme saver, ratcheting down to a savings rate to just 6 percent would probably result in a pretty radical change. Maybe you'd be fine with that, even thrilled.

On the other hand, I think a lot of people save for emotional or psychological reasons rather than just financial ones. So even if from the standpoint of retirement readiness you can afford to save less, you might feel uncomfortable doing that. In that case, you can go on the way you are and continue to pile up savings. Or you could try changing gradually and perhaps arriving at a compromise - something between whatever you're saving now and the calculator's 6 percent.

Whatever you do, keep checking back from time to time to gauge your progress. Retirement planning isn't something you can do once, put on automatic pilot and then check back in a few decades on the eve of retirement. You'll want to make sure you're still on track as you age given changes in your financial situation.

I'd say checking in on this calculator once a year or so should give you a decent sense of where you stand. Or you can get a more nuanced look at how prepared you are for retirement by going to our Retirement Planner tool.

This much is clear, though: You've shown that getting off to an early start with a savings regimen can give you a huge advantage in planning for retirement. With another 30 years to go it would be premature to say you've got a comfortable retirement in the bag. But you've certainly tilted the odds in favor of success.