Avoiding The Paycheck Creep. Here’s Why Your Raise Threatens Your Retirement

Share to twitterAlmost every employee has two goals in their career: make more money and earn enough to one day retire. It turns out, according to new research, that by making more money, you’re also hurting your chances to afford a retirement that accounts for your newfound wealth.

On the surface that looks fine. After all, if you’re making $80,000 and saving 10%, then get a raise to $100,000, well 10% of the new salary is more. Part of the reason the raise can hurt your ability to retire, if you don’t prevent lifestyle creep, is that your retirement savings grow slower than the raise. If you keep a constant 11% savings rate, as your salary moves from $100,000 to $120,000 at age 47, then your standard of living rises while your income from Social Security benefits and past savings remains relatively static. As the chart shows, it leaves you, on an annualized basis, short of your new normal....

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