A household income of $500,000 sounds like a lot, and it is, but depending on where you live and what your lifestyle is like, you could still be living paycheck-to-paycheck.

As the song “Mo Money, Mo Problems” by the late rapper Notorious B.I.G. says, “I don’t know what they want from me/It’s like the more money we come across/The more problems we see.”

A house with a big mortgage, expensive cars, private school tuition, or a lavish lifestyle can all quickly add up and consume a family’s budget. But even the well-to-do need to be scrupulous savers if they want to retire comfortably.

For a household earning half-a-million dollars a year, you will need to have saved $3.88 million by the time you turn 65 if you want to maintain their standard of living after quitting the rat race.

This assumes you are contributing 15% of your pre-tax income to a retirement account, are in a 28% effective tax rate, and earn 6% annually on your portfolio before you retire. After retirement at 65 when you start taking Social Security benefits, your portfolio needs to earn 5% a year. Adjusted for inflation and taking into account market volatility, you can figure on living the way you were while you were working throughout your retirement years.

24/7 Wall St. Insights:

• Just because you have a household income of $500,000 a year doesn’t mean you don’t have money problems and need to carefully plan for retirement.
• You will need to have saved nearly $4 million to be able to continue living your life in retirement in the manner you’ve become accustomed.
• No matter if you’re behind in your savings schedule or are doing better than expected, there is always more you can be doing.
• Also: Take this quiz to see if you’re on track to retire ^(Sponsored)

What to do if you’re behind

All of the above is great if you’ve been a diligent saver, but what if you haven’t and now realize you’re behind schedule? There are a number of things you can do to catch up. 

Be more frugal. Living below your means is always advisable no matter what income you have. It may mean budgeting better and keeping to it.

Eliminate high-interest debt. Prioritize paying off credit cards, auto loans, and other consumer debt that carries high interest rates. Eliminating a credit card with a 21% APR is an immediate 21% return for your finances.

Increase your savings. Fully fund your 401(k) so that you can get the full employer match, if your company offers such an option. Also, contribute the maximum to a Roth IRA. If you’re older than 50, you can also utilize the catch-up provision of the law to make additional contributions for years where you didn’t contribute the full amount. 

Seek out professional advice. A financial advisor can help you develop a personalized retirement plan and make informed investment decisions. They can also help you identify areas where you can save more or invest more effectively.  A tax professional can also help you avoid the minefield the IRS has set for you.

What to do if you’re ahead

But what if you’re ahead of schedule? Just run out the clock and bide your time, or should you do more? The latter option gives you the chance to pad your lead and protect against unforeseen circumstances. Consider doing one or more of the following.

Increase your savings rate. You’re already contributing 15% of your pre-tax income, but bumping it up to 20% or even 25% can multiply the impact of time and compound interest on your final retirement account total. Make sure you’re maxing out your 401(k) and IRA accounts. If you are maxing them out, consider investing in a taxable brokerage account as you won’t face penalties for withdrawing funds before retirement age.

Consider a Health Savings Account. Healthcare is likely to be one of your biggest expenses in retirement and HSAs allow for withdrawals for non-medical expenses after 65 and are taxed like a traditional IRA. Think of it as a supplemental retirement account.

Invest in a diversified portfolio. A well-diversified portfolio can help you exceed your financial goals. Consider investing in a mix of stocks, bonds, and other assets to mitigate risk and maximize returns.

Seek out professional financial advice. Just as with those who are behind schedule, a financial advisor and a tax pro can help those who are ahead. You may need them even more as your greater retirement assets can potentially make planning even trickier for you.

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