It’s easy to put off saving more for retirement, especially when everyday expenses seem to eat up every dollar of your paycheck. But here’s a smart strategy that lets you boost your retirement savings without feeling like you’re cutting back: commit to putting a portion of every future raise into your workplace retirement plan.
The Power of Small Steps
If you’re contributing to a 401(k), 403(b), or similar employer-sponsored retirement plan, you’re already taking a step in the right direction. But often, people set a contribution percentage and then forget about it for years. Meanwhile, their income goes up—but their savings don’t.
That’s where the "raise-and-save" strategy comes in. Instead of spending your entire raise, commit to saving one-third to one-half of it. It’s a manageable way to build wealth over time, and because you’re only allocating a portion of new income, you likely won’t even notice the difference in your take-home pay.
An Example
Let’s say you receive a $6,000 annual raise. Instead of increasing your lifestyle by the full $6,000, you decide to contribute $2,000–$3,000 of that raise to your 401(k). That could look like increasing your contributions by 3%–5%, depending on your salary. You still get a bump in your take-home income, but your future self gets a raise too—in the form of compound growth and long-term security.
Why This Works
- It's automatic. Many workplace retirement plans allow you to set automatic annual increases. Take advantage of this feature!
- It minimizes lifestyle inflation. The more you spend when your income goes up, the harder it becomes to scale back. Saving first helps you maintain balance.
- Tax advantages help. Contributions to a traditional retirement plan are made pre-tax, so your tax bill may shrink even as your savings grow.
Get Started
- Review your current contribution rate.
- Check if your plan offers automatic increase options (many do).
- The next time you get a raise, increase your retirement contribution right away—even a 1% boost makes a difference.
Bottom Line
You work hard for your raises. Let them work just as hard for you. By directing one-third to one-half of each future raise into your retirement plan, you’ll build a stronger foundation for your financial future—without giving up the things you enjoy today.
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