From $90K Income to a Million-Dollar Retirement

You’ve probably heard that “you need a million dollars to retire comfortably.” Whether that’s true depends entirely on your lifestyle and goals — but it’s a useful benchmark. Some people do just fine on social security alone, while others could spend millions in less than ten years.

But, let's keep our million dollar benchmark for our hypothetical study. Let’s explore what the journey could look like for a business owner earning $90,000 per year.

We’ll assume this person does plan to retire someday, but let’s also be realistic. Life doesn’t pause while you fund your future. There are bills, a household, and one of the biggest ongoing costs for many entrepreneurs: healthcare coverage.

To make this scenario even more relatable, let’s also assume our business owner is highly educated and still paying off student loans. They’d love to have them forgiven someday, but for now, monthly payments are part of the plan.

We'll assume a few more things for clarity:

1. They file their taxes as single

2. They have no dependents

3. They live in Vermont (I chose to use my home state)

So here’s the real question:

Can we optimize that same $90,000 income so healthcare and loan costs drop, while still saving meaningfully for retirement?

Scenario 1: The Default Setup

Our business owner starts off the way many do. They work with a few professionals and realize they can split their earnings through W-2 salary and then take what's left (if anything) through business profit. So, let's assume they take a salary of $82,000 and the remaining $8,000 comes as business profit they take home. Total earned is $90,000.

Here is how this set up affects taxes, montly obligations for student loans and health care coverage::

• Roughly $20,000 in combined federal, state, and FICA taxes

• $824 per month for health insurance on the exchange

• $823 per month in student-loan payments under an income-based repayment (IBR) plan

So far, zero dollars saved for retirement.

Scenario 2: Adjusting the Income

Let's assume that our business owner meets with a tax professional and they learn they can reduce their W-2 salary to $60,000 and take $30,000 as business profit instead. Let's assume that their tax professional helps them simply match salary to the reasonable-compensation standards the IRS already allows.

This set up doesn’t change total income, which remains the same and the AGI remains the same as well. It does, however, reduce FICA tax, which means slightly less tax owed and slightly higher take home after tax.

What about the health insurance premiums and IBR payments? No movement at all. They remain the same as in the first case scenario. And, there is still no retirement savings.

Scenario 3: Adding Retirement

The owner keeps that 60K/30K income split from scenario 2 and introduces a SIMPLE IRA through their business, contributing $12,000 toward retirement, or $1,000 per month.

Now, let's assume they have employees and they opt for a 3% match in their plan. Because of this, we’ll assume the business profit drops from $30,000 to $25,000 after employer contributions.

Now the picture shifts:

• Overall income falls

• Taxes are lower

• AGI is reduced

• IBR payment decreases (since it’s based on AGI)

• ACA premium still doesn’t change, even though income is lower

That’s a good reminder that not all systems respond immediately or equally. Healthcare subsidies are sensitive to thresholds rather than gradual reductions. So, while we were able to make some movement, our healthcare premium remains unchanged.

Still, this scenario does reduce some costs and huge bonus is that the owner is saving for retirement.

Scenario 4: Lower Premium

Because the idea was to reduce costs we'll assume a few more things: the owner keeps the $12,000 SIMPLE IRA, but adds the following:

• An HSA compliant healthcare plan and decides to contribute $4,300 (maximum allowed for single in 2025)

• A traditional IRA contribution of $7,000 (maximum allowed for 2025)

These lower AGI through multiple channels while building long-term savings and give us the following:

1. Taxes from from about $20K to about $11K - roughly $9K reduction

2. AGI drops below $60K

3. Healthcare premium goes from $824 per month to about $22 per month - roughly $800/mo reduction

4. IBR payment (through optimization) goes from $823 per month to $318 per month - roughly $500/mo reduction

Overall, we reduced the costs by about $24K per year. And not only that, but this same business owner has $23,300 going toward retirement each year.

The Long View

If we assume that they can continue doing this for ten years, those contributions alone would total $233,000 and that's without them doing anything else but putting that money asside.

Now, let's assume they decide to invest that and let's assume they get a 6% annual return. Over the course of ten years they would have about $307,000 saved for later years.

If we were to extend that over 25 years, their savings would be roughly $1.28 million.

Why It Works

Because financial systems overlap, every adjustment has ripple effects. Additionally, consistency in saving over time with compounding effects of the returns is what makes this case scenario work they way it did.

• How one receives income affects taxes.

• Retirement contributions (pre-tax) reduce taxable income, AGI and build nest egg.

• HSAs offer tax and AGI reduction and tax-free withdrawals for qualified healthcare expenses, whether in the year taken or down the line.

• Lower AGI unlocks lower healthcare premiums and smaller IDR student-loan payments.

When you shift one, others shift as well, however not all of them work in the same rate.

If our business owner was to contribute say $7,000 to Roth IRA there would be no reduction in taxable income nor reduction in AGI for that amount, because those contributions are after-tax.

The Real Takeaway

I always say: it’s not necessarily what you earn, it’s what you preserve.

Of course, higher income gives you a bigger shovel, but it's really about structuring what you already have and optimizing it along the way.

The $90K business owner in this example didn’t work harder or earn more. We assumed that all things would remain equal and we assumed that all rules would remain the same.

The reality, though, is that laws and rules change all the time. Our sitution and life changes all the time. Our goals shift over time, which means we have to keep changing what we do and how overtime as well.

📺 Watch the Full Walkthrough

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