For decades, Americans have been told to save more, invest more, and keep contributing to retirement accounts. But retirement expert Cody Gunn believes there comes a point when saving another dollar may no longer improve someone’s financial future.
According to Gunn, some people continue putting thousands into traditional 401(k) accounts even after accumulating enough money to support their retirement. Those extra contributions can create future tax obligations while delaying the lifestyle they worked so hard to afford.
The challenge is knowing when enough is truly enough. Gunn uses a retirement planning framework that examines actual spending needs, Social Security income, future taxes, and the financial security of a surviving spouse.
Why Saving More Isn’t Always the Right Retirement Strategy
During most working years, saving consistently makes financial sense. Contributions grow through investment returns, tax advantages can help, and employer matching contributions provide additional money for retirement.
However, Gunn explains that the same strategy does not necessarily remain ideal throughout someone’s 50s and 60s. Once retirement income needs are adequately funded, continuing to increase traditional retirement balances may offer diminishing benefits.
Traditional 401(k) accounts generally provide a tax break when contributions are made. But withdrawals are usually taxable, meaning a large balance can eventually produce substantial taxable income during retirement.
That becomes particularly important when required minimum distributions begin. Depending on birth year, most people must start RMDs at age 73 or 75 under current rules, even when they do not need the withdrawals for living expenses.
For some retirees, those distributions can increase income taxes, make more Social Security benefits taxable, or raise Medicare premiums. Gunn believes these possibilities deserve attention before deciding to continue maximizing traditional retirement contributions.
The First Step Is Calculating What Retirement Actually Costs
Gunn recommends an approach he calls lifestyle reverse mapping. Rather than beginning with a large savings target, he suggests calculating the actual cost of the retirement lifestyle someone wants to maintain.
The process starts with everyday decisions. Where will the household live, how often will it travel, what activities will fill the week, and which expenses will disappear once work ends?
Once those choices become clear, the next step is attaching realistic costs to them. Housing, groceries, transportation, healthcare, insurance, entertainment, and travel should all become part of an annual retirement budget.
Gunn also recommends removing expenses that exist mainly because someone is employed. These may include commuting, professional clothing, work lunches, and the retirement contributions themselves.
How Retirement Spending Can Differ From Working Income
Consider a household earning $180,000 annually. A common rule suggesting retirees need 80% of their working income would produce a retirement income target of $144,000.
However, Gunn’s example shows that the household might need only $95,000 annually after accounting for expenses and savings contributions that disappear during retirement. That difference can dramatically change the portfolio required.
| Financial Measure | Annual Amount |
|---|---|
| Current household income | $180,000 |
| Retirement income using the 80% rule | $144,000 |
| Estimated actual retirement expenses | $95,000 |
| Difference between the two retirement estimates | $49,000 |
This example is not a universal spending formula. Some households face higher healthcare, travel, housing, or family support expenses during retirement, so their actual numbers may look different.
Gunn’s larger point is that people should calculate retirement costs using their own circumstances. A realistic budget provides a more meaningful savings target than an arbitrary percentage of their former salary.
Social Security Could Change How Much You Need to Save
The next step in Gunn’s framework involves subtracting dependable retirement income from annual spending needs. Social Security benefits, pensions, and other predictable income sources can reduce the amount a household must withdraw from investments.
Suppose the household requiring $95,000 annually expects combined Social Security benefits between $55,000 and $70,000. Its investment portfolio would need to provide approximately $25,000 to $40,000 annually before considering additional taxes.
Using a simplified 4% initial withdrawal assumption produces the following estimates.
| Annual Social Security Income | Annual Portfolio Withdrawal Needed | Portfolio at 4% |
|---|---|---|
| $55,000 | $40,000 | $1,000,000 |
| $60,000 | $35,000 | $875,000 |
| $65,000 | $30,000 | $750,000 |
| $70,000 | $25,000 | $625,000 |
These figures illustrate the calculation rather than guarantee that a particular balance will last throughout retirement. Taxes, inflation, investment performance, retirement length, and unexpected expenses all affect how much someone needs.
Gunn uses this example to explain why a household with $2 million invested might discover it has already exceeded its original retirement savings target. The next question becomes whether continuing to accumulate money improves financial security enough to justify the additional contributions.
Four Signs You May Have Reached Your Retirement Savings Target
Gunn identifies four important signals that can help determine whether someone has accumulated enough in traditional retirement accounts. None provides a definitive answer alone, but together they offer a useful way to evaluate the decision.
1. Your Future Required Withdrawals May Exceed Your Spending Needs
The first signal involves projecting the size of traditional retirement accounts when required minimum distributions begin. These withdrawals are calculated using account balances and applicable IRS life expectancy factors.
Someone born in 1960 or later generally begins RMDs at age 75 under current law. People born between 1951 and 1959 generally begin at 73, which means the proper starting age matters when preparing projections.
If projected required withdrawals exceed the amount needed from retirement accounts, additional traditional contributions may create unwanted taxable income. Gunn considers this an important reason to examine alternatives before adding more money.
However, larger RMDs do not automatically mean someone has oversaved. The decision must consider future spending, current tax deductions, investment risk, and whether the household can benefit from keeping additional assets.
2. Social Security Covers Most Essential Living Expenses
Gunn’s second signal focuses on whether dependable income can support basic living expenses. These costs generally include housing, utilities, groceries, insurance, transportation, and everyday necessities.
When Social Security and pension income cover most essentials, investment withdrawals may primarily support travel, hobbies, home improvements, and other discretionary spending. That can make the household less dependent on investment performance for its basic needs.
For example, a couple receiving $60,000 in combined annual Social Security benefits might have relatively little pressure on their portfolio if essential spending totals $55,000. They would still need to plan for taxes, inflation, healthcare costs, and occasional emergencies.
Gunn believes this distinction changes the purpose of retirement investments. Instead of supporting every basic expense, the portfolio can provide flexibility and help fund a more comfortable lifestyle.
3. Future Tax Rates Could Be Higher Than Today’s Rates
The third signal concerns the difference between taxes paid today and taxes expected during retirement. Traditional 401(k) contributions reduce current taxable income, but their future withdrawals are generally subject to ordinary income tax.
If someone receives a relatively small tax benefit from contributing today but expects to withdraw the money at a higher effective tax rate later, additional traditional contributions may be less attractive.
Gunn recommends comparing future tax brackets, Social Security taxation, and Medicare income thresholds before making the decision. These calculations can reveal whether Roth contributions or other savings arrangements might produce better after-tax results.
The comparison should account for the full financial picture rather than income tax brackets alone. Filing status, state taxes, deductions, investment returns, and the timing of withdrawals can change the outcome.
4. A Large Traditional Balance Could Create Problems for a Surviving Spouse
Gunn considers the surviving spouse scenario one of the most overlooked retirement planning issues. Couples often build financial plans around married filing jointly tax brackets without fully examining what happens when one spouse dies.
A surviving spouse may eventually file taxes as a single taxpayer, depending on their circumstances. Single filing brackets are generally narrower, potentially making distributions from large traditional retirement accounts more expensive.
The survivor may also lose one Social Security benefit while continuing to face housing, insurance, and other household expenses. That combination can create a difficult financial adjustment.
Gunn believes couples should calculate how their retirement accounts and future withdrawals would affect either spouse living alone. Building some savings in Roth accounts, cash, and taxable investments may provide additional options.
What Cody Gunn Recommends Doing Instead of Saving More in a Traditional 401(k)
Reaching a reasonable retirement savings target does not necessarily mean spending every additional dollar. Gunn recommends considering whether future savings should be redirected into accounts or financial priorities that provide greater flexibility.
His approach emphasizes four alternatives. Each serves a different purpose, and the right combination depends on the household’s financial position.
Build a Cash Reserve Before Retirement
A substantial retirement account balance does not guarantee easy access to money for everyday needs. Selling investments during a market decline or making taxable withdrawals at an inconvenient time can create unnecessary pressure.
Gunn suggests building a cash reserve that can cover near-term expenses without relying entirely on market investments. The appropriate amount depends on spending needs, dependable income, and the household’s comfort with financial uncertainty.
Having liquid money available may be especially useful during the first years after leaving work. It can help retirees manage unexpected bills without immediately changing their longer-term investment plans.
Consider a Taxable Brokerage Account
A taxable brokerage account provides another source of retirement funds outside traditional tax-deferred accounts. Investors can generally decide when to sell investments and realize capital gains, subject to their financial needs and tax circumstances.
Gunn believes this flexibility can be useful when managing taxable income during retirement. Qualified long-term capital gains may receive preferential federal tax rates compared with ordinary income from traditional retirement withdrawals.
However, brokerage accounts are not automatically tax-free or more efficient in every situation. Dividends, realized gains, investment losses, and the loss of an upfront retirement contribution deduction should all be considered.
Build More Roth Retirement Savings
Gunn also favors considering Roth contributions when someone already has substantial traditional retirement savings. Roth accounts use different tax rules and may provide tax diversification during retirement.
Qualified Roth withdrawals are generally tax-free, and Roth IRAs and designated Roth accounts in employer plans are not subject to lifetime RMDs for their owners. This can make Roth savings useful when managing future taxable income.
For example, someone approaching retirement might benefit from directing eligible future contributions toward a Roth 401(k) rather than increasing an already large traditional balance. The choice still depends on current and expected future tax rates.
Pay Down Expensive Debt
High-interest debt can put additional pressure on a fixed retirement income. Gunn suggests examining whether paying down expensive balances would improve monthly cash flow and reduce financial stress.
Consider a mortgage payment of $1,500 monthly. Eliminating that payment would reduce annual cash needs by $18,000, although taxes, insurance, and maintenance expenses may still remain.
At a hypothetical 4% withdrawal rate, $18,000 in annual spending represents the income from approximately $450,000 in investments. This illustrates the importance of lower expenses, not that paying off every mortgage creates $450,000 in wealth.
Gunn recognizes that paying off a low-interest mortgage may not be the best decision for everyone. Interest rates, available cash, taxes, liquidity, and investment opportunities should all influence the decision.
Why the Employer Match Still Matters
Even when someone has sufficient retirement savings, Gunn recommends paying attention to employer matching contributions. Many employers provide additional retirement contributions when employees contribute a qualifying amount from their paychecks.
Stopping all contributions could mean losing this compensation. For that reason, continuing to contribute enough to capture the full available match may remain worthwhile, even when additional traditional contributions are no longer a priority.
The more meaningful decision often concerns contributions above the amount needed for the employer match. Gunn encourages reviewing whether that additional money could serve the household better elsewhere.
A Different Way to Use $35,000 in Annual Savings
Gunn illustrates his strategy by comparing two households with the same $35,000 annual savings capacity. One continues directing the entire amount into a traditional retirement account, while the other spreads the money across different priorities.
The second household could allocate $15,000 to a brokerage account, $10,000 to eligible Roth contributions, and $10,000 toward mortgage principal. This example assumes the household qualifies for the selected contributions and has already addressed appropriate cash reserves.
| Savings Destination | Annual Amount | Primary Purpose |
|---|---|---|
| Taxable brokerage account | $15,000 | Flexible investment withdrawals |
| Roth retirement account | $10,000 | Qualified tax-free retirement withdrawals |
| Mortgage principal | $10,000 | Reduce future housing debt |
| Total | $35,000 | Diversify retirement resources |
Gunn’s point is not that this exact allocation works for every household. The example demonstrates how money can support several retirement needs instead of increasing one traditional account balance indefinitely.
Importantly, spreading savings across multiple accounts does not automatically lower lifetime taxes or improve returns. The benefits depend on each household’s existing assets, contribution limits, tax position, and spending goals.
Why the Last Two to Five Years Before Retirement Deserve Special Attention
Gunn identifies the years immediately before retirement as an important planning period. By then, many people have accumulated substantial investments and have a clearer picture of how they want to spend their retirement.
This can be an opportunity to shift attention from maximizing contributions to improving access, tax flexibility, and spending readiness. Households may also have a better understanding of when they will claim Social Security.
Gunn suggests reviewing the overall plan during the final two to five working years. That provides time to adjust savings allocations, build cash reserves, evaluate Roth options, and reduce expensive debt.
However, he does not treat this timeline as a universal rule. People who still face major savings shortfalls may need to continue making substantial retirement contributions throughout this period.
The Hidden Cost of Saving Longer Than Necessary
Gunn argues that retirement planning should account for more than investment balances and future tax bills. Time, health, personal freedom, and the ability to enjoy retirement are also meaningful considerations.
Someone who reaches financial independence at 60 might continue working until 65 because saving more feels responsible. Those additional years may increase financial security, but they also involve a trade-off in available retirement time.
The early years of retirement often provide opportunities for travel, family activities, hobbies, and physically demanding interests. Although many people remain active well into their 70s and beyond, health and energy can change unexpectedly.
Gunn believes people should understand what additional savings would actually accomplish before postponing retirement. Working longer can be rewarding for someone who enjoys a career, but it should not always be treated as financially necessary.
For someone whose retirement plan is already well funded, the extra money may have less practical value than another year of freedom. The key is making the decision based on a reliable financial plan rather than fear of not having enough.
How to Calculate Your Own Retirement Savings Stopping Point
Gunn’s framework can be summarized as a four-step financial review. It is designed to help people determine whether their current assets can reasonably support the life they want.
Step 1: Calculate realistic retirement spending. Build a detailed budget based on housing, healthcare, travel, insurance, taxes, and personal activities. Remove work-related expenses while accounting for costs that may increase after retirement.
Step 2: Compare savings with future income needs. Estimate Social Security and pension benefits, then calculate the remaining amount investments must provide. Evaluate whether the portfolio can support those withdrawals across different market conditions and retirement lengths.
Step 3: Project future taxes and required distributions. Estimate how traditional retirement balances may grow before RMDs begin. Review whether distributions could affect tax brackets, Social Security taxation, or Medicare premiums.
Step 4: Evaluate the surviving spouse scenario. Calculate what happens if household income changes after one spouse dies. Consider whether the remaining spouse will have sufficient income, manageable expenses, and access to different types of savings.
Gunn recommends reviewing these calculations regularly rather than treating a savings target as permanent. Market changes, inflation, family circumstances, and healthcare needs can all affect the appropriate retirement balance.
Does Having $2 Million Mean You Can Stop Saving?
A $2 million portfolio may be more than sufficient for some households and inadequate for others. The answer depends on retirement spending, available income, investment allocation, taxes, retirement age, and expected planning horizon.
For a household requiring only $25,000 annually from investments, $2 million represents substantial financial flexibility. For a household needing $120,000 annually from the portfolio, the same balance faces a much more demanding withdrawal requirement.
Gunn’s framework helps explain why net worth alone cannot identify the correct stopping point. Two retirees with identical account balances can have completely different levels of financial security.
The appropriate goal is not necessarily reaching the largest possible retirement account balance. It is accumulating enough resources to support spending needs while maintaining reasonable protection against market declines, inflation, and unexpected expenses.
The Real Question Isn’t How Much More You Can Save
Cody Gunn believes many Americans become so accustomed to saving for retirement that they never seriously consider whether they have already reached their goal. Even after building substantial wealth, continuing to contribute can feel safer than changing course.
His approach encourages people to examine their actual retirement expenses, dependable income, future taxes, and available financial options. Those calculations may reveal that additional traditional retirement contributions offer little benefit compared with building flexibility elsewhere.
The stopping point is when your existing resources can reasonably fund your retirement goals, withstand realistic financial risks, and provide sufficient future security. Even then, the decision may be to redirect savings rather than stop saving entirely.