So here is my guidelines on how to lower the action on your acoustic guitar by sanding the bridge saddle:
First, make sure you have all the prerequisites:
1. Make sure the neck of your guitar is straight (If you are not sure what this means than do an internet search on adjusting truss rod)
2. Make sure there is some way you can get an exact replacement of your saddle because you might ruin your current one. Fortunately, Taylor is selling replacement parts on their guitars which includes the saddle used on my Big Baby which is only $11.
3. Measure the distance to string at the first fret and the last fret. Note the difference of these. If the difference is lower than 1/16 inches then forget it. Your problem can not be solved by sanding the saddle. The difference on my guitar was 1/8 inches.
3. Buy some sanding sheets. I used 3M sanding sheets which I bought for $3 off amazon. I guess any decent one should do fine. I used medium ones (they also go with the name 150).
4. Buy a new set of strings. Once you unstring your guitar I do not recommended to string it back with the same set of strings. It is always a good idea to change strings often.
After you have the prerequisites and are ready to start remove the strings and the saddle. Using a ruler mark your sanding line from the bottom of the saddle. We will only sand the bottom. This is very important since the top of the saddle is generally formed to hold strings. What we will do is measure the distance we will sand (I sanded 1/16 inches off the bottom of my bridge saddle. Thinking that I started with a difference of 1/8 inches between first and last frets, a good starting point could be to use half of the difference you found in the previous step. Or you can start very low, try your guitar and reiterate if it doesn't seem enough.) and mark a straight line around the saddle. Don't forget to mark the sides they will be useful.
Grind the bottom of the saddle along the sanding sheet. Make sure you are applying even pressure directly on the saddle towards the surface of the sanding sheet. We don't want to sand any side more than the others. A good trick is to rotate the saddle in your hand 180 degrees after a few grinds and use different directions while sanding just to be sure.
When you reach the marked line, than you are done. See, it's that easy. Now you can put the saddle back, restring your guitar and try it.
If there is string buzz this can mean three things:
1. You sanded too much (Order a new saddle and retry)
2. Your neck was not straight in the beginning (Order a new saddle and adjust your trust rod)
3. Your frets need adjustments (Order a new saddle and take your guitar to a tech)
As you might have noticed if you have string buzz than your saddle is gone. Consider yourself warned!