The Most Overlooked Move During Merit Season

But after working with Cardinal employees for more than a decade, something far more important than the size of the raise is what you do with it.

There is one simple move that has changed the long-term trajectory for many people I work with. It is increasing their 401k or HSA savings rate by one percent (or more) during the merit cycle.

It sounds small. It feels small. But it works for a reason that has nothing to do with spreadsheets. When your pay is already going up, increasing your savings rate does not feel like a sacrifice. Your take-home pay still rises. You do not feel the full impact of the change. And because of the tax benefits in a pre-tax 401k or HSA, every additional dollar saved often costs far less than a dollar of take-home pay.

I have watched clients repeat this move year after year. One percent at a time. Sometimes two. Over a decade, their savings rate climbs far higher than they ever imagined. Ten percent higher. Fifteen percent higher. Even twenty percent higher. And they never felt like they were cutting back.

The impact is obviously huge. Clients who thought they would miss travel bucket list goals, family financial goals, or other priorities find themselves right back on track or ahead. Not because they made dramatic changes. Not because they chased investment trends. But because they made one small decision at the right moment each year.

This same idea also works for people who already max their 401k and HSA. Once those accounts are full, the next step is simply shifting the extra savings into a taxable brokerage account. The psychology is identical. When the increase happens during merit season, the change feels natural. Take home pay still rises, and the additional savings begin compounding in a flexible account that can support early retirement, college, travel, or any other long-term goal.

I have seen high savers use this approach to build meaningful brokerage balances over time. It gives them more options, more liquidity, and more control (especially for those who are targeting a pre-65 retirement). 

I am writing this now, well before the next merit cycle, because the people who benefit most from this strategy decide early. They set the intention before the raise shows up. They mentally earmark the increase. By the time the new paycheck arrives, the decision is already made.

If you want to get ahead financially without feeling like you are squeezing your lifestyle, this is one of the most effective steps you can take. Small changes made consistently will dramatically reshape your long-term picture.

If you ever want to talk through your Cardinal benefits or your own situation, you’re welcome to schedule a relaxed Q&A. No cost, no pressure, and no expectation to meet again — just a chance to talk things through. CLICK HERE TO SCHEDULE 

Take care and, as always, stay the course.