The effect of saving $8,000 a year on your budget can be enormous, especially for someone living on a fixed income. And for retirees — who will likely be leaving that sum in their retirement accounts — the savings also translate to additional investment returns.
According to Mutual of Omaha’s savings calculator, a nest egg of $500,000 earning returns of 7 percent should last just 19 years if your federal tax rate is 25 percent and you’re withdrawing $3,500 a month, which is the equivalent of spending $42,000 a year. However, reduce that withdrawal amount by $666.67 (the monthly savings of $8,000 a year) and it jumps all the way to 28 years — buying you almost an extra decade on your retirement account.
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