I Earn $100,000 a Year. Will I Be Able to Retire a Millionaire?

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Earning a lot of money doesn’t guarantee you a millionaire retirement. Read on to see why. 

The average 60-something nearing retirement has $112,500 saved, reports Northwestern Mutual. But your goal may be to retire with a lot more money than that. You may even have the aim to retire with 10 times that much, or $1 million or more.

If you earn a salary of $100,000 a year, you should know that you may have an easier time meeting a goal like that than someone earning, say, $60,000 a year. But earning a high salary alone does not guarantee that your savings goal will be met. For that to happen, you’ll need to spend your money wisely and make long-term savings a priority.

It’s all about what you do with your money

Over the past 50 years, the stock market has rewarded investors with an average annual return of 10%, as per the performance of the S&P 500 index. This means that if you save $200 a month in an IRA or 401(k) over 40 years, and your portfolio delivers that same 10% return during that time, you stand to retire with over $1 million.

Meanwhile, it’s fair to say that saving $2,400 a year is pretty doable when you have a $100,000 salary. That’s only 2.4% of your income. And, with a traditional IRA or 401(k), you get a tax break on the money that goes into your account (whereas with a regular brokerage account, you don’t). So that makes it even easier to save.

But just because you have the potential to save for retirement doesn’t mean you’re actually going to do it. What sometimes happens to higher earners is that they end up falling victim to lifestyle creep.

As your salary grows, you may be inclined to take on expenses that allow you to enjoy the fruits of your labor. That could mean buying a more expensive home and driving a more expensive car. It could also mean dining out more frequently and taking a luxury vacation every year instead of alternating with more modest ones. All of these habits, however, could end up monopolizing your income to the point where there’s no money left over to fund your retirement savings.

To be clear, if you earn $100,000 annually, you’re probably getting paid that salary as a result of hard work. And you absolutely deserve to enjoy your success by treating yourself to nice things. But you may need to set a limit to help ensure that your nest egg isn’t neglected.

Another option to consider? Automate the process. If you have a 401(k), contributions are made automatically through payroll deductions. With an IRA, you’ll have to set up an automatic transfer. But if you commit to that transfer, you’ll be sending money into your retirement account before you get a chance to spend it all, thereby making it more likely that you’ll be able to meet your savings goal.

Don’t assume you’ll be all set

Having a high salary might give you confidence that you’re going to be able to achieve your various financial goals, including being able to retire comfortably. But that’s not guaranteed. To get to that point, you’ll need to make sure you’re limiting your spending to some degree, all the while saving and investing in the right accounts that make it possible to grow wealth.

Retiring a millionaire on a $100,000 salary is something that absolutely can be done. Just make sure to set yourself up to make that happen.

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