You're More Likely To Be A High-Income Saver If You Have These Characteristics

When it comes to savings, rules such as the 50/30/20 budget help us understand how much we should be putting away. However, these rules do not tell us if we're saving more or less than the average person. Sure, knowing if you're a high- or low-income saver may be unnecessary, but for many looking to retire as a millionaire, knowing the characteristics of the top savers may make it easier to achieve goals. Luckily, a study from the Social Security Administration provides details on what it means to be a high-income saver as well as the characteristics of individuals and households that reach that status. When analyzing the characteristics of high-income savers, the SSA found that they are more likely to be college graduates, self-employed, have pension coverage, and have thought about retirement.

In its Lifetime Earnings study, the SSA ran a computer model and created a simulated median wealth-to-earnings ratio that came out to 0.0750. The wealth-to-earnings ratio is simply a calculation of a household's financial assets divided by its lifetime earnings. For example, if a household has lifetime earnings of $2 million and assets totaling $200,000, its wealth-to-earnings ratio is 0.10. The study classified low-income savers as households that fall under the simulated wealth-to-earnings ratio and high-income savers as those above it. 

At first glance, it may seem that being a high-income saver simply comes down to making more money. It's the common "I'll save more when I make more" mindset. After all, according to the U.S. Bureau of Labor Statistics, in 2024 median weekly earnings for individuals with bachelor's degrees were $587 higher than those of individuals with high school diplomas. Even by the SSA's account, men and women with bachelor's degrees earn approximately $900,000 and $630,000 more over the course of their lifetimes than high school graduates. Individuals who are self-employed are also capable of making more money later in life and have greater control over their income than salaried workers. However, earning more money is only part of becoming a high-income saver. As many have experienced before, earning more often leads to lifestyle inflation as people loosen their spending habits and gain more expenses but do not bolster their savings.

The SSA also found that individuals with access to workplace retirement plans and who have seriously considered retirement are more likely to be high-income savers. Thinking about retirement and having a plan can be extremely beneficial, as it provides a structure and motivation to accumulate savings and long-term wealth. Meanwhile, having access to workplace retirement plans such as pensions or 401(k) plans can act as a forced savings method that benefits from being invested in the market for several years. While earning more can lead to more savings, thinking about retirement and making consistent contributions is just as important to becoming a high-income saver.