Almost every employee has two goals in their career: make more money and earn enough to one day retire. It turns out, according to new research, that by making more money, youre also hurting your chances to afford a retirement that accounts for your newfound wealth.

As people earn raises during their career, their lifestyle expectations change. Its one reason why you dont live like you did when you were in your 20s. It turns out, though, that the percentage that one saves doesnt change, even as raises boost a salary.

On the surface that looks fine. After all, if youre making $80,000 and saving 10%, then get a raise to $100,000, well 10% of the new salary is more.

The math doesnt account for a persons growing lifestyle expectations, which becomes more expensive after the raise. Without increasing the percentage of retirement savings, the employee will now experience a shortfall come retirement, based on their adjusted living expectations, according to new research by the financial services firm Morningstar.

When you get a raise, any type of new income becomes normal, said Steve Wendel, head of behavioral finance at Morningstar and co-author of the raise research. People then spend that income, affording more expensive vacations or nicer cars, and that becomes your new standard. But in order to now afford that lifestyle in retirement, you must save more than your previous savings rate, added Wendel.

In the financial independence retire early (FIRE) movement, theres a strong concern for lifestyle creep. Its the psychological tendency to, as you make more to spend more. What studies have found, as you spend more, the materials you purchase become your status quo. You dont necessarily get enjoyment out of the extra spending, but it feels natural or almost like a baseline requirement to live your life.

What the Morningstar study highlights is just how much lifestyle creep can endanger your retirement.

How Much To Save From The Raise

Part of the reason the raise can hurt your ability to retire, if you dont prevent lifestyle creep, is that your retirement savings grow slower than the raise. If you keep a constant 11% savings rate, as your salary moves from $100,000 to $120,000 at age 47, then your standard of living rises while your income from Social Security benefits and past savings remains relatively static. As the chart shows, it leaves you, on an annualized basis, short of your new normal.

With a raise from $100,000 to $120,000, this person will discover a gap in expectations come ... [+] retirement.

The solution? Always save part of your raise, said Wendel.

The researchers tested three ways to save the raise. They evaluated the effectiveness of spending twice your age (meaning years) to retirement. This means if youre retiring in 10 years, you would spend 20% of the raise and save 80%. The second option was to save your age. If youre 40 years old, you would save 40% of the raise. And, finally, save 33% of the raise, no matter the age.

For the youngest earners, all three strategies worked fairly well, leaving someone able to afford a new lifestyle, even with the raise. At 35, the strategies begin to diverge, and the effectiveness of stashing 33% of the raise tactic falls off. It isnt until age 45 when the effectiveness of the Save Your Age strategy begins to wane.

The only strategy to work for all ages was the spend twice your age to retirement tactic.

It allows you to spend some now, but also boost your retirement income, added Wendel.

Avoiding Lifestyle Creep

What the savings strategy also prevents is too much lifestyle creep. If you save more, you cant spend it. By keeping your costs lower, you have less to make up for in retirement.

Youre locking in a standard of living from now until retirement instead of setting yourself up for a drop in retirement, said Wendel.

Those that pursue FIRE, saving 50% of their income or more in order to retire at an extremely young age, take painstaking efforts to prevent lifestyle creep. Therefore, as more money flows in, it isnt used to necessarily bolster their lifestyle. Instead, its used to strengthen their retirement accounts.

For most people, though, theres a psychological tendency to take a breath when receiving a raise, leading to more spending even in situations where theyre actively trying to fight lifestyle creep. Thats true for someone following FIRE strategies as well.

To counter this, Wendel suggests planning for the raise prior to actually getting it.

Its easier to invest the raise at the onset, than to do so when its in a checking account, he added.

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Avoiding The Paycheck Creep. Heres Why Your Raise Threatens Your Retirement - Forbes