Why You Should Live Like Your Salary Is $23K Less — and How It Could Make You Richer
Written by
Laura Bogart
Edited by
Kristen Mae
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One of the foundational pieces of advice you’ll get from any financial expert or advisor is to save as much as you can for retirement. They may have different — sometimes, very different — views on how to go about it, but they almost all agree: You have to prepare for the years that will hopefully be your golden years.
A lot of popular advice encourages you to “max out” your 401(k) contributions every year — in 2025, that means setting aside up to $23,500 annually, assuming you’re under 50 and not eligible for additional catch-up contributions.
That amount isn’t exactly a small chunk of change. And when you’re trying to meet other financial goals, like buying a home or paying down debt, it’s easy to put saving for retirement on the back burner. After all, don’t more immediate needs come first? But as you approach retirement, you might just find yourself wishing you’d spent today thinking about tomorrow.
Instead of fretting about how you’ll possibly plan to contribute $23,500 to your 401(k), consider a new mindset: What if you simply lived like your salary was $23k less than it actually is?
Embrace Frugality While Saving for Your Future
OK, before you start shaking your head, consider this: If you learn to build a realistic, even comfortable, budget based on an income that’s $23,000 less than your actual earnings, maxing out your 401(k) suddenly doesn’t seem so impossible.
While this approach admittedly isn’t possible for everyone — if you’re earning a lower income and struggling to pay bills or manage debt, this strategy may not be for you just yet — it can make the process of setting aside money for retirement feel much more manageable.
One way to start: Calculate what deducting $23,000 from your yearly salary would look like on a paycheck-to-paycheck basis. This helps you build a weekly or monthly budget based on your “reduced” income — a number that reflects your full take-home pay, minus what you will automatically funnel into retirement savings.
As you begin to treat your adjusted salary as your real one — with the money you contribute to your 401(k) effectively “out of sight, out of mind” — you’ll start building long-term frugal habits. These habits won’t just help you save more money now; they can also help you stretch your savings even further later, when you begin taking distributions in retirement.
Maxing Out Your 401(k) Can Build Wealth
Financial advisors recommend maxing out your 401(k) for a reason: It’s one of the most effective ways to build wealth. By contributing the maximum amount allowed, you’re saving a larger portion of your income while taking full advantage of compound interest — the magic that happens when your money earns interest on both your contributions and your previous earnings.
Not too shabby.
Even Forbes has noted that maxing out your 401(k) each year could help you become a millionaire by retirement. The key is consistency and time.
Set Yourself Up To Retire Earlier
By maxing out your 401(k) regularly, you’re laying a solid bedrock for your retirement and giving yourself peace of mind that you’ve “left it all out on the field” in terms of savings. Better yet, getting into the habit of maxing out your 401(k) can lead you to explore other retirement savings vehicles, from traditional and Roth IRAs to CDs, money market accounts, annuities, or even precious metals.
Combined with other savings and investments, your well-funded 401(k) could position you to retire earlier than expected, or at least provide the flexibility to decide if that’s something you want. But even if early retirement isn’t your primary goal, having a robust 401(k) balance can prevent financial catastrophe if you ever need to leave the workforce unexpectedly due to issues with your health or family.
Bottom Line
If you’re able to do it, living on $23,000 less than your current salary to max out your 401(k) may take some getting used to — but it could help you build real wealth and develop frugal habits that stretch that wealth further. And if you play your cards right, you just might get to retire earlier than you ever thought possible.
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