Rewards of living on less

At Bankrate we strive to help you make smarter financial decisions. While we adhere to strict , this post may contain references to products from our partners. Here’s an explanation for

Grandma was right. Living on just a little bit less can go a long way toward ensuring your retirement income will be sufficient to carry you through the years when you’ll need it.

This retirement planning finding by actuary Anna Rappaport, chair of the Committee on Post-Retirement Needs and Risk for the Society of Actuaries, and key author of a new study on retirement security, confirms what many of us would have guessed. But it comes with some important caveats.

Living frugally won’t help you much if during your working life you earned an average income and your retirement budget is tight to begin with. Rappaport’s study calculates that couples who made an average income of $60,000 during their working lives and who are retiring with less than $100,000 in savings may be able to survive everyday problems by living frugally, but eliminating this kind of discretionary spending won’t be enough to help them overcome major shocks such as serious illness or even just simple longevity.

But if you earned more during your working life and you have a more generous retirement budget, cutting just 15 percent of discretionary spending can increase the likelihood that you will have enough money throughout your lifespan.

For instance, the study found that cutting just 15 percent of spending increases the probability of having some money left at death from 8 percent to 54 percent for couples earning $105,000 annually during their working lives and retiring with $250,000 in savings. Similar frugality can extend the probability of having some money left at death from 14 percent to 32 percent for couples earning more than $150,000 annually and having $500,000 in retirement savings.

To have these kinds of results, you have to first have a budget that reflects what you’re spending and the self-discipline to consistently live on less. But the reward for old-fashioned thrift can clearly be a big one, especially if you simply haven’t saved enough.