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Income Growth: What Your Raises Are Worth
Most FIRE math holds your pay flat. Real careers have raises, and a raise can bring financial independence years closer or push it further away. Which one happens depends less on the size of the raise than on where it goes.
A raise you save does double work: it adds to the savings and leaves the spending, and so the FIRE number, where it was. A raise you spend does the opposite. Your savings stay the same while the target moves away from you.
Small real raises compound
A real raise is what pay grows beyond prices. A cost-of-living increase that only matches inflation is a real raise of zero. Over a career even small real raises add up. Take-home pay of $70K after 20 years:
| Real raise a year | Pay in 20 years |
|---|---|
| 0.5% | $77.3K |
| 1% | $85.4K |
| 2% | $104K |
In today's dollars, so each figure buys what it says it does.
What a raise is worth, depending on where it goes
Take an earner bringing home $70K who spends $50K and has $50K invested. Set how fast their pay rises after inflation, and how much of each raise they save rather than spend.
Explore: raises and where they go
The earner's numbersExample
Years to FI
24 yrs
22 yrs with no raises
Spending then
$71.3K
from $50K today
FIRE number then
$1.8M
at a 4% withdrawal rate
| Raise saved | Years to FI |
|---|---|
| 0% | 32 yrs |
| 25% | 27 yrs |
| 50% | 24 yrs |
| 75% | 21 yrs |
| 100% | 19 yrs |
At a 2% real raise each year.
Example figures from a sample household. Build your plan →
Saving the raise before you see it
A raise is the easiest money to save, because you have not got used to spending it yet. Richard Thaler and Shlomo Benartzi built a plan on that idea, Save More Tomorrow: employees agreed in advance to send part of each future raise to their retirement plan. At the first company to offer it, the people who joined raised their average saving rate from 3.5% to 13.6% of pay in 40 months. Because each step up arrived with a raise, take-home pay did not fall.
Many 401(k) plans now offer the same thing as an automatic yearly increase. Setting it once, at the size of a typical raise, does what the explorer above calls saving part of each raise.
How your plan treats raises
Every rate in your plan is real, already net of inflation. Your plan grows your pay by the real income growth on the Income page, 0.5% a year unless you change it, and grows the savings you entered at the same rate. Your retirement spending, and with it your FIRE number, rises only by the real expense growth on the Expenses page, 0% unless you change it. A small default is deliberate: typical pay rises steeply early in a career and flattens later, and the plan applies one rate to every year.
If you expect real promotions, raise the income rate. If you expect your spending to grow with your pay, raise the expense rate too, and the plan moves your FIRE number to match.
The bottom line
Raises help most when spending doesn't follow them. Decide in advance how much of each raise to keep, automate it if your plan allows, and keep the growth rate in your plan modest unless you have a reason to expect more.
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Published October 13, 2026