How to Save an extra $1 million with No Change to your Lifestyle

I recently came across this article entitled, “Americans who switch jobs are seeing pay gains nearly double of those who stay put” on Yahoo Finance. In that article they reference data from ADP where the median job changer in the month of March saw a 10% raise! In the height of the post-covid inflation bubble, job changers saw a 16.4% increase! Those that stay in their jobs only saw a raise of 5.1% during the same period in March.

This got me thinking, for someone willing to battle in the job market, what could be the impact on someone’s retirement portfolio assuming a 7% growth rate on new funds saved from a raise:

For someone currently making $150k, if they were to get a raise of 10%, they would earn a new $15,000 per year. If we assume a tax of 30%, they would net $10,500. If that full $10,500 is invested at 7% per year, that investment would grow to $60k over 5 years or to nearly $1 million over the next 30 years given the above assumptions. This savings comes from the new income of the job change and therefore there would be no reduction in lifestyle to save these funds.

The above table shows various incomes and lengths of time with the same 30% tax and 7% return assumption. Look at your closet starting wage and time until retirement to see how a raise may impact your situation. Of course, there are assumptions here that could turn out to be incorrect, but it is a worthwhile exercise, nonetheless.

Hard decisions come in many forms. Here we explored looking at the difficulty of staying with your current income and the financial life it affords you vs the incremental progress of seeking a raise.

If your interested to see how your financials are progressing toward your goals, schedule a meeting with one of our advisors here.

Wishing you well and thank you for reading!

This commentary reflects the personal opinions, viewpoints, and analyses of Wooster Corthell Wealth Management, Inc. “WCWMI” employees. The information presented should not be viewed as a comprehensive analysis of the topics discussed but instead is general in nature.

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