When Rules of Thumb Fall Short: “Increase Your Savings Rate as Your Income Rises”

There’s a rule of thumb that shows up in almost every personal finance conversation: as your income goes up, your savings rate should go up too. 

It sounds reasonable, and for many people it’s the right play. But like most rules of thumb, it only works until real life enters the picture. People’s lives don’t move in straight lines, and their savings rates shouldn’t be expected to either.

When You’re Late in Your Career and Already on Track

I meet people late in their working years who have already saved enough for retirement. Their income may still be high, but their priorities have changed. Instead of pushing their savings rate higher, they want to clear out the last of their debts, complete a kitchen upgrade, and enter retirement with as much freedom and as few obligations as possible. So long as their savings are on track to meet their goals, holding their savings rate steady—or even reducing it—can be the most responsible choice.

When You’re Changing Careers and Letting Compounding Do Its Work

I also meet people who are intentionally stepping into a new chapter of work. They’ve saved aggressively for years and reached a point where their investments can grow on their own. They’re not retiring. They’re simply choosing work that fits their life better. Their savings rate may drop, but their long‑term trajectory remains solid because the compounding is already doing the heavy lifting.

When You’re a Young Family in a Particularly High‑Expense Season

Then there are the young families whose income is rising quickly, but so are their expenses. A new home and/or childcare that costs more than a mortgage. Life feels stretched even though the future looks bright. For them, a temporarily lower savings rate is not necessarily a setback. It’s a bridge to a season where expenses will ease and savings can rise again.

When Income Drops but Savings Capacity Actually Rises

Sometimes the opposite happens. I’ve seen people in their late fifties whose income has gone down, yet their savings rate has gone up. The mortgage is gone. Child‑related expenses have faded. Debts have been paid off. They are saving a higher percentage of their income than they did when they earned more. The rule of thumb doesn’t know what to do with that either.

When You’re Cash Flowing College

And of course, there are the parents’ cash flowing college. Their savings rate dips for a few years, not because they’re off track, but because they’re choosing to support their children in a meaningful way. Once that season ends, their savings rate can rise again.

The Real Point of the Rule

Rules of thumb can be helpful, but they are no substitute for understanding your own numbers, your own season, and your own goals. The goal isn’t to follow a rule. The goal is to build a strategy that works for you.  So long as you have a plan where the real math works, being flexible with your savings rate throughout time can free up cash to enhance your quality of life without putting your long-term security at risk.

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Take care and, as always, stay the course.