Savings Rate Calculator

Why does your savings rate matter more than your income?

Because the same number decides both how fast you add money and how much you’ll need. If you start from zero and plan to live in retirement on what you live on now, your years to financial independence depend on your savings rate, your return and your withdrawal rate. Your salary drops out of the math.

Take two people who both invest 20% of their take-home pay. One brings home $50,000 a year, the other $150,000. With a 7% return, 3% inflation and a 4% withdrawal rate, both need 41.3 years. The higher earner saves three times as much, but also spends three times as much and needs a portfolio three times as big.

Now drop the higher earner to 10% and raise the lower earner to 30%. The person on $150,000 needs 59.3 years. The person on $50,000 needs 30.8. A bigger paycheck only helps if some of it stays unspent.

Mr. Money Mustache made this point in a 2012 post called The Shockingly Simple Math Behind Early Retirement. He started from a net worth of zero, assumed 5% returns after inflation and a 4% withdrawal rate, and used a chart from networthify.com to show that saving half your take-home pay gets you there in about 16 years. This calculator gives 16.4 years with his assumptions. With this site’s more cautious defaults, a real return of about 3.9%, the same 50% takes 17.6 years.

How does this calculator define savings rate?

Your savings rate is the share of your take-home pay that you invest. Take-home pay means what’s left after income and payroll taxes, with your 401(k), 403(b), HSA and other payroll savings added back, since that money is yours and you’re saving it. That’s also how Mr. Money Mustache defines it in the post above.

Everything you don’t save counts as spending. The calculator assumes you’ll keep spending that amount in retirement, and it uses that figure for your FIRE number. If you expect to spend more or less once you stop working, open “Spending in retirement” and enter a different amount. Your savings rate still sets your contributions; only the target changes.

People argue about whether the rate should be measured against gross or take-home pay, and neither side is wrong. Fidelity’s familiar guideline is to save at least 15% of your pre-tax income, employer match included. The Bureau of Economic Analysis measures the US personal saving rate against disposable personal income, which is income after taxes. A gross-based rate looks smaller for exactly the same behavior, because taxes sit in the denominator even though you can neither spend nor invest that money.

I use take-home here because the spending figure has to be right, and spending is take-home pay minus savings. The honest weakness is that pre-tax 401(k) money will be taxed when you withdraw it, so a rate that includes it flatters you a little. Build those taxes into your retirement spending if most of your savings are pre-tax. And if your employer adds a match, add it to both your pay and your savings.

What does the table under the result show?

It takes your take-home pay, what you already have invested and your assumptions, and runs them at savings rates from 10% to 70%. Your own rate is highlighted, and added as its own row if it falls between two of them. Each row assumes you’d retire on what you’d spend at that rate, unless you’ve set a retirement budget, in which case every row uses that budget.

Here’s the table for someone taking home $80,000 with nothing invested yet:

The first step is the one that counts. Going from 10% to 20% takes 18 years off. Going from 60% to 70% takes off 4. If you’re saving 5% or 10% today, each extra point you find is worth far more than it will be once you’re at 40%.

Money you already have shortens every row, and it helps the low rates most. It also brings income back into the picture: $100,000 invested is a big head start on a $40,000 budget and a small one on a $120,000 budget.

Why Coast FIRE comes long before FI

Full financial independence is the far end. For most people the more useful milestone is Coast FIRE: the point where what you’ve invested will grow into your FIRE number by your normal retirement age without another contribution. From then on you only have to earn what you spend. The calculator shows that age next to your FI age, using the retirement age you enter.

Lauren is 29, takes home $72,000 and saves 25% of it, which is $1,500 a month. She has $40,000 invested and plans to retire at 65. At that rate she spends $54,000 a year, her FIRE number is $1,350,000, and she reaches full FI at 63. She could stop saving at 55 and still retire on time.

If she moves to 35%, she invests $2,100 a month and her FIRE number falls to $1,170,000, because a smaller budget needs a smaller portfolio. Her FI age moves 8 years earlier, to 55. Her coast age moves 13 years, to 42. The Coast FIRE line rises every year too, so her portfolio closes the gap on it slowly, and a modest push moves the point where they cross a long way.

Say she stays at 25% but expects her retirement to cost $45,000 a year because the mortgage will be gone. Her FI age becomes 59 and she could coast from 48. That’s 7 years earlier without saving a dollar more, which is why I’d spend more time on the retirement budget than on any other input.

Where does this model break down?

It assumes your spending in retirement matches your spending now. That’s rarely exact. Kids leave, mortgages end, and health insurance before Medicare can cost more than people plan for. Use the retirement spending option when you know yours will differ.

Your savings rate and pay are held steady in today’s dollars. If you save most of every raise, your real rate climbs and you’ll get there sooner than this shows.

Returns are the same every year. A bad market just before you hit your number can push the date back. The Monte Carlo calculator runs a plan through thousands of simulated markets if you want a range instead of one line.

Taxes on withdrawals aren’t modeled, and neither is the 10% additional tax that usually applies to 401(k) and IRA withdrawals before 59½. If you plan to stop in your 40s, you need money you can reach before then.

Social Security isn’t counted. That doesn’t change much about when you can stop working, but it does lower what your portfolio has to carry later on. The Social Security version of the calculator handles that part.