Make Money: Take a Pay Cut

It's one of the more dreaded workplace scenarios: You go in to talk with your boss about your annual compensation, and walk out of the meeting taking home fewer Gs each paycheck.

Turn the scenario on its head, like Fool community member dianakalt, and you can make that pay cut your decision -- and one that sets you up for a sweeter retirement. "I know you all want to know what cosmic force is running against me," she explains. "It's actually the cosmic force that gives out raises."


This Fool turned a measly 1.8% raise into a 2% increase in her 401(k) savings. "According to, my paycheck will go down by about $7 or $8, because I am bumping the 401k up by 2%." Consider following her lead. Community member catscanner did: With his annual raise, he's now maxing out his 401(k) and automatically funneling the "extra" 2% into a Roth IRA.

See what a pay cut can do for your retirement: Run the numbers to see how different savings scenarios play out, anticipate the roadblocks we run into when planning for retirement, and start picking out carpet for your retirement bungalow with the help of our Rule Your Retirement Online Seminar.

The next time you get a salary bump -- no matter how slight -- funnel it towards your future.

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