We all know that higher spending lowers the amount we can save for retirement. An inflated lifestyle also requires a bigger retirement stash if you want to continue to fund those higher expenses in retirement. Even relatively small luxuries necessitate saving more for retirement if you want to continue to enjoy them over 30 years of retirement.
Consider the impact your cable TV bill has on your monthly expenses. Many people pay $100 a month or more for the privilege of channel surfing. A $100 per month bill costs you $1,200 per year or $36,000 over a 30-year career.
However, there are plenty of ways to watch TV at a lower cost. A Netflix or Hulu subscription could allow you to watch many of the shows you already enjoy at a fraction of the cost. And some networks put many of their shows online for free.
Even if you're not ready to cut the cord, you may be able to cut your cable bill if you're willing to spend some time negotiating or switching providers. Many cable providers promote deals for new customers only. It's worth asking if your current provider will match a competitor's deal in order to keep you as a customer. If they won't, you can quit your current provider and join a competitor servicing the area, and even switch back and forth to get the new customer pricing every couple of years. Or you can end your current service, wait a bit and sign up again as soon as you are considered a new customer. Doing this when you have a vacation scheduled can make the wait more bearable and allow you to avoid paying for a service you won't be using while out of town.
Constantly switching cable providers to take advantage of promotional rates certainly isn't the same as having service continuously, but the $50 a month you save by being a new customer can go a long way, especially if you invest the sum for retirement. And if you realize that cable TV isn't really that important to you during the time you don't have reception, then you can pad your retirement account with $100 a month, or $1,200 a year.
And if you won't need an expensive cable plan in retirement, you won't need to save as much to fund your desired lifestyle. A whopping $36,000 nest egg in today's dollars is needed to fund a $1,200 a year cable bill over 30 years of retirement. However, that cable bill could also increase by the time you retire due to inflation. If your retirement is 30 years away and the cable companies increase prices at 3 percent a year your $100 monthly expense could be well over $200 in three decades, which means cable TV watchers will need even more savings to safely fund that monthly fee. Those who cut the cord won't need to save nearly as much for retirement to live comfortably.
And the benefits of ditching your cable TV service don't stop there. You could save the $1,200 per year that you used to spend on cable and put it in your 401(k) or IRA instead. If your portfolio grows at just 5 percent a year, your nest egg will have an extra $81,870 in 30 years.
So just by ditching cable TV you can live comfortably in retirement with over $36,000 less saved. And if you instead invest the amount cable TV costs each year you will have almost $82,000 more in savings. Who knew watching TV cost so much?
Obviously, we've made a few assumptions here. First, you aren't guaranteed to get 5 percent a year from your portfolio, but historical returns of the market have been close to 10 percent. If you assume 10 percent annual returns, saving $1,200 per year would grow to $207,929 over 30 years. Secondly, your savings won't buy nearly as much in the future as it does now due to inflation. But the bottom line is that something as commonplace as your cable TV bill takes a serious amount of retirement savings to fund. Whether cable TV is worth it to you is a personal decision, but the lifetime cost of cable TV could easily add up to an entire year's salary or more.
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