Lifestyle inflation means spending rises as income rises. This post leans on sources I can cite: a recent survey of higher earners, a long-studied way to commit raises to saving, and the arithmetic of what a raise can do. The good news is that the second item is a solution with published results.
Lifestyle inflation: What One Survey Found
Goldman Sachs Asset Management’s Retirement Survey and Insights Report 2026, as reported by Fortune on October 13, 2026, surveyed 5,106 people aged 45 to 75, made up of 3,612 workers and 1,494 retirees. It found 36.6% of households earning over $500,000 said they mainly live paycheck to paycheck, compared with 60.8% of the under-$50,000 group and 22.2% of the $100,000 to $200,000 group. The results are self-reported (Fortune). The survey doesn’t show that lifestyle inflation is the cause, so I’m not claiming that.
- Fortune reports that 80% of those earning over $500,000 have delayed a major financial goal, and 45% of that group have delayed retirement savings specifically (Fortune).
- Higher earners cited more complex finances, higher lifestyle expectations, larger fixed commitments such as bigger mortgages, pricier cars, private school tuition and frequent travel, and family obligations (Fortune).
- Goldman noted that two households can report the same strain for different reasons (Fortune).
Why a Savings Percentage Can Leave Room for Spending
Assume you get a $500 monthly raise and aim to save 25% of income. Then $125 of the raise is saved and $375 is available to spend. Under a fixed monthly spending limit, the whole $500 is saved because the limit didn’t move. That arithmetic is exact, but the numbers are assumed.
A Raise Example (Assumed Numbers)
Assume a $10,000 annual raise and a 10% savings rate. Saving 10% of the raise is $1,000. If your savings rate slips to 9.2% on that raise, you save $920. Under a fixed spending number, all $10,000 goes to saving, investing or debt payoff, which is ten times the $1,000 case.
A Tested Approach: Commit Raises in Advance
Save More Tomorrow, developed by Richard Thaler and Shlomo Benartzi, has people commit in advance to allocating a portion of future salary increases to retirement savings. In the first implementation, 78 percent of those offered the plan joined, 80 percent of enrollees stayed through the fourth pay raise, and the average savings rate rose from 3.5 percent to 13.6 percent over 40 months (Chicago Booth).
Thaler’s testimony lists four features: a delayed start, scheduled increases at each raise, continued increases until a maximum or opt-out, and no pay cut, since increases come out of raises (Thaler testimony to the Joint Economic Committee).
The reported average rates were 3.5%, 6.5%, 9.4%, 11.6% and 13.6% across the starting point and four raises (Thaler testimony). Applying those rates to an assumed $60,000 salary with 3% raises each time gives this illustration.
| Stage | Salary (assumed) | Savings rate | Saved per year |
|---|---|---|---|
| Start | $60,000 | 3.5% | $2,100 |
| Raise 1 | $61,800 | 6.5% | $4,017 |
| Raise 2 | $63,654 | 9.4% | $5,983 |
| Raise 3 | $65,564 | 11.6% | $7,605 |
| Raise 4 | $67,531 | 13.6% | $9,184 |
Five Years of the Committed Path vs. Staying Put (Assumed Salary)
To see what the Save More Tomorrow pattern could add up to, take the assumed $60,000 salary with 3% raises each year from above and compare two paths: staying at the starting 3.5% savings rate, or following the reported average rates of 3.5%, 6.5%, 9.4%, 11.6% and 13.6%. Salaries are computed with exact compounding, so they differ by a few dollars from the rounded figures in the table above.
| Year | Salary (assumed) | Saved at a flat 3.5% | Saved on the committed path | Difference |
|---|---|---|---|---|
| Year 1 | $60,000 | $2,100 | $2,100 | $0 |
| Year 2 | $61,800 | $2,163 | $4,017 | $1,854 |
| Year 3 | $63,654 | $2,228 | $5,983 | $3,756 |
| Year 4 | $65,564 | $2,295 | $7,605 | $5,311 |
| Year 5 | $67,531 | $2,364 | $9,184 | $6,821 |
Over the five years, the flat path saves $11,149 and the committed path saves $28,890, a difference of $17,741. These are contributions only, with no investment return, and they assume everyone follows the study’s average rates, which individuals won’t do exactly. I read it as an encouraging picture: the extra saving comes entirely out of raises, so take-home pay doesn’t fall.
Deciding a Raise Split Before It Arrives (Assumed)
Suppose a $10,000 annual raise. Committing it in advance can be as simple as writing a split. For example, 50% to retirement contributions, 30% to an emergency fund or debt payoff, and 20% to spending would be $5,000, $3,000 and $2,000 a year, or $417, $250 and $167 a month. The split is my illustration, not a recommendation from any source. What the research above supports is the commitment in advance and the automatic increase, not any particular percentages.
- Write the split before the raise is approved, so it doesn’t compete with new wants.
- Set the transfers up so they start with the first paycheck that includes the raise.
- Revisit the split once a year, and raise the saving share when your next raise arrives.
About the Inflation-Plus-1.5% Idea
The Wikipedia summary of The Missing Billionaires (2023, by Victor Haghani and James White) says the authors suggest inflation plus 1.5% as a benchmark for calculating excess returns. That is a return benchmark, not a spending rule (Wikipedia).
My Take on Lifestyle Inflation
- Set a monthly spending number and review it on a schedule instead of letting it drift with your paycheck.
- Decide where a raise goes before it arrives, such as retirement contributions, an emergency fund or debt payoff. That mirrors the commit-in-advance idea above.
- Review recurring charges when your income changes, since subscriptions and payments tend to stay once set up.
- Plan celebrations on purpose, as a one-time, budgeted treat rather than a new permanent cost.
- Ask whether your plan offers automatic increases. Some retirement plans do, and it is worth checking.
These are my suggestions based on the arithmetic above, not findings from a study.
Sources
- Fortune: Goldman Sachs retirement survey on $500,000 earners (Oct. 13, 2026)
- Chicago Booth: Save More Tomorrow, using behavioral economics to increase employee saving
- Thaler testimony before the Joint Economic Committee (March 10, 2004)
- Wikipedia: The Missing Billionaires
This article offers general information and my own opinions, not financial, tax, or legal advice. The figures in worked examples are assumed. Laws, tax rules, and products change and can differ by location, so check current official sources and talk to a qualified professional about your own situation.
Related reading: How to Build an Emergency Fund From Scratch in 2026: 7 Practical Steps and $200 a Month at 25 Beats $400 a Month at 35. Here’s the Math.