In hindsight, I overshot. But not by much. I considered their retraction to be in poor taste and poor faith. All it would have taken is a counter-offer to realign the discussion.
If someone takes it as some perceived slight that you've asked for a higher amount, then consider they'd probably be equally offended if you asked for a raise down the road, and then you'd be in a bad spot...
Of course being able to not worry about being turned down is a luxury we can't always afford.
(Also, I have at times thought I massively overshot, and kicked myself because they immediately accepted; you'd be surprised how much of an increase you can ask for sometimes)