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Are Americans oversaving for retirement?

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We all hear about the importance of saving for retirement on a daily basis, but are Americans now putting too much away?

According to Yahoo! Finance, most “retirement numbers” are causing people to oversave by as much as 20 percent.

“There are three common assumptions that many software tools and financial advisors use to come up with a retirement savings goal—a 70% or 80% replacement rate based on pre-retirement income, an income need that rises with inflation, and a 30-year retirement time horizon,” [David Blanchett, head of retirement research for Morningstar Investment Management] says. “When we looked at actual retiree spending patterns and life expectancy, however, we find that these assumptions don’t hold true for many people and, on average, can significantly overestimate how much people will actually need to fund their retirement.”

Blanchett said the replacement rate depends on numerous factors, such as the state people plan on retiring in, their overall income and their retirement plans.

Blanchett also said it’s difficult to compute retirement numbers until employees are about 20 years away from retiring.

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