Matching money with values

Want More Money in Retirement? Spend Less

The financial reward of spending less is striking. Steven Sass, associate director at the Center for Retirement Research at Boston College, offers this example: Say you're 55 years old, and you plan on retiring in ten years. If you save an extra $1,000 a year, you'll have $10,000 plus investment earnings(in today's dollars). So, if your savings earned 4% above inflation -- you'd have about $12,500 (in today's dollars) at retirement. You could then withdraw about $500 a year in retirement, assuming you choose to spend 4% a year above inflation.

Here's the thing: The real return from this strategy comes from cutting spending to enable the extra savings. When you retire, you'll have actually improved your household finances by $1,500 a year: $1,000 in additional accumulated savings plus $500 in income. "As you approach retirement, and it's clearly too late to significantly add to your retirement savings by saving more, moving to a more sustainable standard of living has a much greater effect," says Sass. "The two effects of saving more and spending less could significantly improve your finances."

An emphasis on greater thrift doesn't have to mean living cheaply -- far from it. Instead, thrift or frugality should push us to match our money with our values. In History of the Thrift Movement in America, a 1920 book by Simon William Straus, Straus argues that thrift includes both saving and spending wisely.
Comment: I've got a lot to learn about thrift. I do know that a $ not spent today is money I will be able to live on in retirement. Next step for us ... house downsizing. Probably won't do until the Spring after we retire. Image source

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