Boosting retirement savings has a less-appreciated benefit
Boosting retirement savings can significantly enhance a household's financial future. In addition to increasing the retirement fund, saving more encourages households to live on less, which can lower the overall amount needed for retirement. This practice may also enable individuals to retire earlier than they otherwise could.
- ▪Increasing the savings rate improves retirement prospects.
- ▪Saving a larger share of income encourages living on less money.
- ▪Living on less reduces the total amount needed to sustain a retirement lifestyle.
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At risk of stating the obvious: Boosting one's savings rate is among the best ways to improve a household's retirement prospects. Doing so increases the size of the financial war chest one can deploy in old age. But there's another, somewhat hidden benefit to saving a larger share of income, according to financial advisors — it simultaneously pushes households to live on less money, thereby reducing the amount of money they'll ultimately need to fund their lifestyle in retirement. It may even help reduce the age at which someone is financially able to retire."A higher savings rate doesn't just build the portfolio faster. It also lowers the amount you need to retire," Fran Walsh, co-founder of Opulus, a financial advisory firm based in Doylestown, Pennsylvania, wrote in a recent post.
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