Retirement · Savings rate
Savings rate to years to retire.
How long until work is optional depends mostly on the share of take-home pay you save. Enter a rate and see the years, plus a table of rates from 10% to 80%.
Saving 50% of take-home pay, with a 5% real return and a 4% withdrawal rate, takes about 16.6 years from zero. The target is 25 times what you spend, and the more you save, the lower your spending, so the target and the timeline both shrink.
Inputs
Result
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The arithmetic
Call take-home pay 1 and the savings rate s. You spend 1 − s each year, so the target is (1 − s) ÷ withdrawal rate. Saving s each year at a real return r, the balance after n years from a starting balance B is B(1+r)n + s((1+r)n − 1) ÷ r. Setting that equal to the target and solving gives the years. Saving more does two things at once: it adds more each year and it lowers the spending that has to be funded.
Mr. Money Mustache’s widely read 2012 post builds the same chart on two stated assumptions: a 5% real return while saving and a 4% withdrawal rate. He says a 50% savings rate gets you there in about 16 years, and this tool shows 16.6 years for the same assumptions.
Worked example. Take-home pay $60,000, saving 50% ($30,000 a year), spending $30,000: target = 30,000 ÷ 0.04 = $750,000. At 5% real from a zero balance that takes 16.6 years. At 10% it takes 51.4 years, 20% 36.7, 30% 28.0, 40% 21.6, 60% 12.4, 70% 8.8 and 80% 5.6.
The rate here is measured on take-home pay. If your rate is based on gross pay or you have employer matches, taxes or pensions, treat this as a rough guide. Returns will not be steady in real life.
Frequently asked questions
How many years until I can retire if I save 50%?
About 16.6 years from zero at a 5% real return and a 4% withdrawal rate. Change the return or the withdrawal rate to see how sensitive that is.
Should I use take-home or gross pay?
This tool uses take-home pay so that spending and saving add up to 100% of it. If you only know your rate on gross pay, your take-home savings rate is higher.
Why does a higher savings rate help twice?
You contribute more each year, and you spend less, so the portfolio you need at the withdrawal rate is smaller.
What if my real return is lower?
The years go up, most sharply at low savings rates. Try 3% or 4% real to see how the table changes.
Sources
Checked
- Mr. Money Mustache: The Shockingly Simple Math Behind Early Retirement (13 January 2012)
- Wikipedia: FIRE movement
Runs entirely in your browser. Nothing you type is sent or stored. Formulas are standard arithmetic; assumptions such as returns are yours to set.
Not advice
Illustration only. Assumes a steady real return and ignores taxes, fees and changing income. Not financial advice.