The Power of a High Income

When I started my new job in 2019, I "restarted" my 401k. Six years later, I've hit a quarter million in my account---a number that finally feels substantial to me. But unlike my Roth IRA, sheer brute force was the driver. With the pedal to the metal, the dollars accumulated twice as fast. 

High Earnings, High Savings

Full disclosure: this exercise has been brought to you by a six-figure income. I was able to save consistently the entire time with very little interruption. And I barely felt it, because I kept my spending the same despite an increase in income. Automatic deductions made it even easier, because "out of sight, out of mind." 

Values

Date	Value	Total Contributions*	Growth	%
6/30/2019	$ 3,243	$ 3,145	$ 98	3.12%
9/30/2019	$ 7,853	$ 7,668	$ 185	2.41%
12/31/2019	$ 14,016	$ 12,858	$ 1,158	9.01%
3/31/2020	$ 16,346	$ 18,897	$ (2,551)	-13.50%
Y1--6/30/2020	$ 25,208	$ 23,971	$ 1,237	5.16%
9/30/2020	$ 31,884	$ 28,321	$ 3,563	12.58%
12/31/2020	$ 40,128	$ 32,358	$ 7,770	24.01%
3/31/2021	$ 53,166	$ 42,645	$ 10,521	24.67%
Y2--6/30/2021	$ 63,063	$ 47,840	$ 15,223	31.82%
9/30/2021	$ 67,759	$ 52,294	$ 15,465	29.57%
12/31/2021	$ 79,336	$ 56,207	$ 23,129	41.15%
3/31/2022	$ 89,950	$ 70,565	$ 19,385	27.47%
Y3--6/30/2022	$ 80,182	$ 74,975	$ 5,207	6.94%
9/30/2022	$ 80,949	$ 80,120	$ 829	1.03%
12/31/2022	$ 90,246	$ 83,315	$ 6,931	8.32%
3/31/2023	$ 112,716	$ 98,493	$ 14,223	14.44%
Y4--6/30/2023	$ 128,175	$ 103,791	$ 24,384	23.49%
9/30/2023	$ 129,973	$ 109,973	$ 20,000	18.19%
12/31/2023	$ 148,734	$ 113,194	$ 35,540	31.40%
3/31/2024	$ 181,515	$ 129,530	$ 51,985	40.13%
Y5--6/30/2024	$ 194,594	$ 134,641	$ 59,953	44.53%
9/30/2024	$ 212,218	$ 140,601	$ 71,617	50.94%
12/31/2024	$ 220,735	$ 144,029	$ 76,706	53.26%
3/31/2025	$ 227,514	$ 160,750	$ 66,764	41.53%
Y6--6/30/2025	$ 258,383	$ 166,255	$ 92,128	55.41%

*including the employer match

Growth?

My Roth IRA took fourteen years to hit the quarter-mil mark, chugging along anemically as I saved where I could. It was prioritization, perseverance, hustle, and creativity, but the biggest lift came from a favorable market. Time in the market beats timing the market.

Meanwhile, my 401k only took six years to get here, but it was driven by a high savings amount. Market growth was basically flat for four years, but the dollar amount in the account still went up substantially every year because I was maxing out my contributions. I basically went from using a snow shovel to using a snowplow. Nothing beats a high savings rate.

There is so much power in increasing income while keeping spend the same and saving the difference.

Spending Less?

There is only so much good that saying "spend less" can do. Someone who only earns $20k/year likely won't be able to save/invest that entire $20k/year, and it's disingenuous to say otherwise. The power of a high income is not acknowledged enough within the personal finance community. It's extremely out of touch to say "anyone can do it" without the numbers to back it up.

On the flip side, if you make $100k/year and spend $100k/year, you'll also get nowhere. Spend less than you earn, save the difference, and mind your gap.