Savings Rate Calculator

Most personal finance advice focuses on investment returns — which fund to pick, how to allocate between stocks and bonds, whether to use a Roth or Traditional account. These decisions matter. But they pale in comparison to one variable that most people barely think about: how much of their income they actually save.

Your savings rate is the percentage of your take-home income that goes to savings and investments rather than spending. A 20% savings rate means you save $1 for every $4 you earn. A 50% savings rate means you save half of everything you make.

The reason this number dominates every other variable is structural. Savings rate affects your timeline to financial independence in two directions at once. When you save more, you accumulate faster. But you’re also spending less — which means the target you’re accumulating toward is smaller. Both effects compound. The result is that moving from a 20% savings rate to a 30% rate doesn’t just speed things up by 50% — it cuts roughly 9 years off your timeline.

The savings rate → years to FI table is derived from a straightforward financial model: assume you start from zero, invest your savings at a 5% real (inflation-adjusted) annual return, and retire when your portfolio can sustain a 4% safe withdrawal rate indefinitely.

The formula: years to FI = ln(1.25 × (1 − s) / s + 1) ÷ ln(1.05), where s is your savings rate as a decimal. The 1.25 comes from combining the 4% SWR and 5% return assumptions; the natural log converts the exponential growth into time.

Two important caveats. First, the model assumes you’re starting from $0 in savings. If you already have a portfolio, you’ll reach FI faster — the chart is a worst-case baseline for where you are today. Second, it assumes your spending in retirement equals your spending now. If your lifestyle will cost meaningfully more or less in retirement, adjust accordingly. The FIRE Number Calculator on this site handles that scenario precisely.

The model was popularized by Mr. Money Mustache and is grounded in the same research framework as the Trinity Study — the foundational research behind the 4% rule. It’s a planning benchmark, not a guarantee, but it’s the most widely validated framework for long-term retirement planning.

The 50/30/20 rule says to split take-home pay into three buckets: 50% for needs, 30% for wants, and 20% for savings and debt repayment. It’s useful as a starting framework — it’s simple, actionable, and most people violating it are spending too much in one category.

But 20% savings, starting from $0, produces FI in roughly 37 years. For someone starting at 25, that’s retirement at 62 — barely ahead of the traditional schedule. It’s a floor, not a goal.

For meaningful acceleration, treat the 50/30/20 rule as a first step. The highest-leverage moves are in housing and transportation — typically the two largest spending categories. Reducing housing costs by 10% of income (say, from $2,500 to $2,000 on a $5,000 income) adds 10% to savings directly. Over a 30-year career, that single change compounds into hundreds of thousands of dollars.

There’s a widely misunderstood shift in what matters most at different stages of wealth-building. In the early years, contributions dominate. A 7% return on $50,000 is $3,500. Your $18,000 in annual savings ($1,500/month) matters far more than the return you earn on a small portfolio.

As the portfolio grows, this relationship inverts. At $500,000, a 7% return produces $35,000 — roughly twice what most people save annually. At $1,000,000, the same return adds $70,000 — more than most people’s after-tax salary. Your portfolio has become its own income engine that dwarfs your contributions.

The practical implication: maximize savings rate aggressively in your first decade. The absolute dollar amount matters less than the habit and the rate. Later, when the portfolio is large, staying invested and not disrupting compounding matters more than squeezing out another percent of savings.

There are two legitimate schools of thought on this question, and the right answer depends on your situation and how you define “savings.”

Include it: Paying off debt builds net worth exactly the same way saving does — it increases assets (or in this case, reduces liabilities). A dollar going to pay down a 20% APR credit card generates a guaranteed 20% return. From a pure net-worth perspective, this is often the highest-return investment available. Many FI practitioners count debt payoff as savings, especially when the interest rate exceeds expected investment returns.

Exclude it: Debt payoff doesn’t generate a compound return until you’re debt-free. Unlike investments, it doesn’t produce cash flow or grow over time — it just eliminates a drag. Some planners prefer to track “invested assets” separately from “debt reduction,” because only invested assets will generate the returns that fund retirement.

This calculator lets you toggle between both views. The right answer for most people: include debt payoff while actively paying down high-interest debt, then shift entirely to investment-based savings rate once debt-free.