Are You a High-Income Earner? Three Unexpected Reasons to Save More Than You Think You Should

High-income earners sometimes put off saving because they think they have plenty of time and money to do it later. That's not always the case, though.

By Eric Roberge, Certified Financial Planner (CFP) and Investment Adviser

published 17 February 2025

in Features

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Saving money is often framed around two main goals: setting aside a portion of earnings to build a nest egg for retirement, or building up cash savings to use on big purchases.

These are obvious reasons to save — but what if you don’t have a hyper-specific short-term goal that gives you a clear reason to feel motivated about saving? What if you already saved up for and bought the nice car? What if you moved into your forever home five years ago? What if the idea of retiring decades from now feels so far-off and removed from your present-day life, it's tough to get inspired to save the dollars you earned today so that Future You can enjoy them decades down the road?

The 'someday' trap high-income households can fall into

As a financial planner who works with fortysomethings midway through their careers, I see a lot of folks get stuck and lose steam at this stage.

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You’re established in your career and in your peak earning years. You don’t need to do as much planning to afford what you want; a high income gives you the ability to simply make the purchase. You’ve already checked most major spending needs off your list, and you’ve already bought the house where you’re raising your kids.

Meanwhile, retirement still feels far enough away that it becomes something you’ll worry about “later.” You can get serious about saving in a few years, and why not? You have time to catch up, don’t you?

This is the midcareer, high-income trap that leads you to think you can max out your 401(k) and call it a day … even if that contribution to your future represents less than 10% of your gross income. From experience, I know there are still three critical reasons to save and keep saving — and why we recommend the clients in our BYH Wealth Management program contribute 20% to 25% of gross income to long-term investments each year.

1. Compounding works best when you give it time

Warren Buffett accumulated almost all of his billion-dollar-plus net worth after he turned 65 years old. That is the exponential power of compounding at work.

You can't fully harness the potential of compounding returns if you don’t have any runway. The longer you wait to save into the market, the less money you have working to earn a return and the less time there is for anything to compound before you withdraw it because you need it to fund your life after work.

The best time to save was always yesterday. Don't miss out on the opportunity today presents to you, even if you don't have a goal in mind for those dollars. It’s great if you can maintain a list of specific, measurable, actionable goals and work your way from one to the next. And that’s not realistic for most people.

We all go through stages of life where things are more static, or there’s not an obvious next objective. Not having a precise goal should not stop you from saving aggressively. You'll always need to use money as a tool throughout your life. Even if you're not crystal clear on what the money will be used for down the road, know that you're feeding the compound effect if you save and invest now.

Time does magical things to money when you let those two factors interact without interruption.

2. All well-designed systems include margins for error

Every system — including your personal financial money management! — needs a margin of safety if it wants to operate no matter what, even if things go wrong. I love how Shane Parrish defines this in The Great Mental Models, Volume 3:

Margin of safety is a secret weapon. It’s the buffer, the extra capacity, the redundancy that you build into a system….You can apply a margin of safety to any area of life with risk. The key is always asking yourself: What if I’m wrong? What if things don’t go as planned?

It’s not flashy. It’s not exciting, but it’s the foundation on which everything else is built. Master it, and you’ll be well on your way to navigating the uncertainties of life with confidence and stability.

Creating room for error in your financial plan is about much more than just having an emergency fund (although that is a good start). Saving above and beyond what you need for retirement creates "margin of safety" if things don't work out the way you think they will, either because of an unexpected external force (your career doesn't pan out the way you hope) or a choice you have total control over (you’ve always planned to be a working parent but actually decide to stay at home once you have kids).

Here are a few other ways you can create buffer room in your finances so that you can enjoy success and stability even when things don’t go according to plan:

Using conservative assumptions when projecting how much you think you’ll make in the future (and, therefore, how much you think you’ll have to spend)
Overestimating future expenses (so you’re not surprised when things turn out to be more expensive than you hope)
Assuming you’ll eventually run into a stretch or two of bad luck along the way and having protective measures in place to weather those storms (those measures could include maintaining cash reserves, holding the proper insurance policies and, again, saving more than you think you have to while you can)

3. Life is nonlinear

When we run financial projections, by default, they show a linear outcome. No financial projection can account for all the left turns people make in real life.

Left turns look like having kids in your 40s when, up until that point, you thought you were going to be child-free (and now you have to figure it out). Or a left turn could be basing your retirement age on your invested assets — then emptying your brokerage account because you want to buy a rental property when you turn 50.

Left turns don't need to be negative events or have unwanted outcomes. But they do change your financial situation in a material way. If you save more than you "have to" or "should" for retirement, then you have the financial ability to power through the turn and keep going strong.

Life is not just nonlinear. It’s also highly unpredictable. If you’re in a great financial position today, it’s not wise to assume you’ll stay there. You want to proactively do what you can now to maintain that positioning over time. Part of that is acknowledging that you may not always be able to save like you can today.

Things change, for both good and bad — the only opportunity you can know you can capitalize on to grow your wealth is based on decisions you can make right now. Everything else is uncertain; “someday” is not an actual date on the calendar. Don’t let the chance to make the right move today pass you by.

Eric Roberge, CFP®, is the founder of Beyond Your Hammock, a Boston financial planning firm that provides wealth management strategies to high-achieving professionals. See how you can optimize your investments, reduce your tax burden and grow your wealth by requesting a free, personalized BYH Financial Benchmarking Report here.

Disclaimer

This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

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Eric Roberge, CFP®, is the founder of Beyond Your Hammock, a financial planning firm working in Boston, Massachusetts and virtually across the country. BYH specializes in helping professionals in their 30s and 40s use their money as a tool to enjoy life today while planning responsibly for tomorrow.

Eric has been named one of Investopedia's Top 100 most influential financial advisers since 2017 and is a member of Investment News' 40 Under 40 class of 2016 and Think Advisor's Luminaries class of 2021.