Investment advice is often dispensed as a one-size-fits-all solution. However, in reality, how much you can save and how you can invest hinges on how much you earn.
Someone earning a relatively low income doesn’t have the same breathing room to invest and take risks as someone earning a six- or even seven-figure income.
With that in mind, here are some sound investment strategies at three remarkably different income levels.
If you earn $30,000 or less, you have very little wiggle room with your finances. It’s difficult to think about setting money aside for retirement in 30 or 40 years when you’re worried about next month’s paycheck or rent payment.
Households earning less than $35,000 experience higher rates of psychological distress, such as nervousness and depression, according to a 2024 study published in the Journal of Family and Economic Issues. (1)
If you’re struggling with a low income, your first priority should be to relieve some of this psychological burden. The key could be accumulating an emergency fund of three to six months of living expenses. Saving that money won’t be easy and will require sacrifices. However, over the long term, it should greatly improve your financial health and anxieties.
After building a reasonable emergency fund, try saving 10% of your income and investing it in a relatively safe bond ETF such as Vanguard’s Total Bond Market fund (BND).
If you were to invest, say, $250 a month in this ETF, you could emerge roughly three years later with the $9,000 you invested plus a few hundred dollars in earnings, depending on interest rates at the time.
With this safety net in place, you can take more risks with your education and career. Perhaps take a few months off to look for a new, higher-paying job or invest in a course that can generate extra income. Investing in safety, skills and your career should probably be your top priority until you can achieve a middle-class income.
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Earning $65,000 makes you more or less middle-class. In the U.S., the median individual income was $45,140 and the median household income was $83,730 in 2024, according to the U.S. Census Bureau and the Federal Reserve. (2)
At this level of earning power, you have some breathing room to think long-term. If you’ve managed to set aside an emergency fund, you can now start diverting your savings to a long-term retirement plan. At this income level, even minimal savings can compound into genuine wealth over time.
For instance, if you save just 5% of your salary, or $271 a month, and invest it in a low-cost index fund that tracks the S&P 500, you could become a millionaire in 37 years — assuming historic annual average returns of 10% repeat themselves. In other words, if you start saving at 25, you could have a seven-figure portfolio by the time you reach 62.
This strategy could be supercharged if your employer offers a 401(k) match. Nearly 98% of companies with a 401(k) plan option also offer matching benefits, according to the Plan Sponsor Council of America. (3) And, on average, the match is between 4% and 6%, according to the U.S. Bureau of Labor Statistics.
Assuming you save 5% in your 401(k) plan and your employer matches 5% on top, you could reach millionaire status in 30 years, assuming the same 10% annual return from the S&P 500.
However, this calculation assumes your earning potential doesn’t change over three decades, which is unrealistic. Most employees see their salaries grow with experience.
It also ignores inflation. Having $1 million in retirement savings in 30-plus years isn’t the same as having $1 million to retire on today.
The six-figure club isn’t as exclusive as it used to be. As of 2024, roughly 18% of adults earn over $100,000 a year, according to a YouGov poll. (4)
A six-figure income is even more common on a household basis. Nearly 42% of all U.S. households earn over $100,000 a year, according to IBIS World. (5)
Earning $105,000 or more a year theoretically puts you in a very comfortable position. Saving just 5% of your income and investing it in a low-cost index fund could get you to millionaire status in 32 years, and that’s without accounting for matching contributions from an employer.
However, your biggest challenge at this income level isn’t retirement, but lifestyle inflation and taxes. Nearly 43% of individuals who earn more than $100,000 say they are barely coping or struggling financially, according to YouGov.
Put simply, you can outspend any salary, no matter how attractive, with bad spending habits and a lack of tax planning. At this stage, your top priority should be hiring a professional financial advisor to help you navigate savings and investments strategically.
With a customized investment strategy tailored to your income level, you can reach your financial goals faster than most of your peers.
We rely only on vetted sources and credible third-party reporting. For details, see our editorial ethics and guidelines.
WorkWise (1); United States Census Bureau (2); Plan Sponsor Council of America (3); YouGov (4; IBIS World (5).
This article provides information only and should not be construed as advice. It is provided without warranty of any kind.
