Soft Saving: Is Saving Less and Living More Actually a Plan?
Soft saving means choosing to save less than the old rules demand so you can live more now. Less sacrifice for a retirement decades away, and more spent on experiences, health and time.
It started as a reaction to the most extreme advice, the kind that tells you to save half your income and retire at forty. As a correction to that, it has a point.
Whether it's a real plan depends on your age, and on one thing the idea usually leaves out. Here's what it costs at 50, where it gets things right, and a version that keeps the good part.
Living now and saving are both lines on the same page. Example data.
The short version
Soft saving: a lower savings rate, chosen on purpose, in exchange for more life now.
It's right that putting your whole life off until later is a poor trade.
It costs more the later you start, because there are fewer years to make it up.
The sturdy version sets a minimum first, then lets you spend the rest without guilt.
Where the idea gets it right
Health and energy aren't evenly spread across a life. Some things are better done at 50 than at 75.
Extreme saving has a cost too. Years of saying no to everything are years you didn't live.
Guilt isn't a strategy. Spending you've chosen and can afford doesn't need an apology.
None of that is controversial. The real question is how much less to save, and whether you worked that out or just went with a feeling.
What it costs at 50
Take a business owner who could set aside $400 a month but decides on $200, to free up money for travel and time off. She has fifteen years until 65. We'll assume her savings grow 6% a year.
Monthly amount | Put in over 15 years | Balance at 65, at 6% |
|---|---|---|
$400 | $72,000 | about $116,300 |
$200 | $36,000 | about $58,200 |
Difference | $36,000 | about $58,100 |
The 6% is an assumption, not a promise. Using it, halving her savings frees up $200 a month today, which adds up to $36,000 over fifteen years, and leaves her about $58,100 short at 65.
Under the common 4% guideline, $58,100 supports about $2,300 a year of spending in retirement, or roughly $190 a month. So the trade, put plainly, is $200 a month now for fifteen years, against about $190 a month later for the rest of her life.
Put that way, it's close to even, and a reasonable person could choose either side. That's the honest answer. Soft saving at 50 isn't reckless, but it isn't free either.
Why your age changes the answer
Here's what saving $200 a month less costs by 65, depending on when you start.
Starting at | Years to 65 | Cost at 65, at 6% |
|---|---|---|
30 | 35 | about $284,900 |
40 | 25 | about $138,600 |
50 | 15 | about $58,200 |
58 | 7 | about $20,800 |
This table usually gets used as an argument for saving young, and it is one. But read it the other way too. At 58, saving $200 a month less costs about $20,800 by 65. If you're in your late fifties and already have a solid base, spending a little more on your life isn't the mistake the old rules make it sound like.
If you're in your late fifties without that base, the table says something harder: the remaining years can't do much of the work, so the amount you save has to.
What the idea leaves out
Soft saving talks about retirement as the only thing savings are for. But if you work for yourself, your savings do a second job that matters more this year: they're what stands between a slow quarter and a credit card.
What your savings do | When it matters | Can you soften it? |
|---|---|---|
A cushion for uneven income | This year | No |
Money set aside for tax | Every quarter | No |
Retirement | In the decades ahead | This is the only part with any give |
The first two aren't optional. A business owner who cuts back on those isn't living more. She's borrowing from next spring.
The cushion and the tax set-aside come before anything gets softened. Example data.
A version with a floor
Tax first. Set aside your share of every payment, and leave it alone.
Your cushion second. Build it until it holds at least one month of costs, and ideally three.
Then a minimum for retirement. An amount you'd stick to even in a slow month. If you can add more in a good year, do.
Everything above that is yours to spend, on purpose and without guilt.
This keeps what's right about soft saving. You decide your minimum once, with the numbers in front of you, and after that you're free to stop feeling bad about a holiday.
How to choose your minimum
Start from the gap, not from a rule. Work out the yearly spending your savings will need to cover after Social Security, as we did in our post on the 4% rule, and see how far along you already are. If you're well along, your minimum can be low. If you're not, your minimum is the plan.
So, is soft saving a plan?
With a minimum, yes. It's a decision to save a known amount and enjoy the rest, which is what most good plans come down to.
Without one, it's just a feeling with a name. The difference between the two is about an hour with your own numbers.
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Bring it to the Collective
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Questions we hear
What is soft saving?
Choosing a lower savings rate so you can spend more on your life now, as a reaction to very aggressive savings advice.
Is soft saving a bad idea?
Not necessarily. It depends on your age, what you already have, and whether you set a minimum you stick to.
How much does saving less cost?
At an assumed 6% a year, saving $200 a month less from age 50 leaves you about $58,200 less at 65. Returns aren't guaranteed.
Can self-employed people soft save?
On retirement savings, within reason. Your tax set-aside and your cash cushion for uneven income shouldn't be reduced.
References
"Soft saving" is a recent popular term with no single source. Every figure in this post is our own arithmetic, using an assumed 6% yearly return and the 4% withdrawal guideline. Both are illustrations, not forecasts.
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A note on what this is
This article is educational. The Money Mastery System is an educational tool, not financial software, and nothing here is legal, tax, investment or financial advice. The growth rate is an assumption for illustration, investment returns are not guaranteed, and how much to save is a personal decision. For guidance on your own circumstances, please speak with a qualified professional who knows them.
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