Savings rate
How to calculate your savings rate
Divide what you save in a period by your take-home (after-tax) income in that period. If you bring home $5,000 a month and put $1,000 of it into savings and investments, your savings rate is 20%.
What counts as "savings"
Money going into investment accounts, retirement accounts, savings accounts, debt principal payments (beyond the minimum), and other assets that build long-term wealth. Money spent on rent, groceries, vacations, or consumed assets does not count.
Why it matters so much
A 10% savings rate typically means about 50 working years before you have enough to retire. A 25% savings rate cuts that to roughly 30 years. A 50% savings rate is around 15 years. The math is unforgiving and beautiful — your savings rate, not your income, is the dominant variable.
Working years to retirement by savings rate
Assumes a 5% real return, working with current take-home pay, and the 4% safe-withdrawal rule.
| Savings rate | Years to financial independence |
|---|---|
| 10% | 51 years |
| 20% | 37 years |
| 30% | 28 years |
| 40% | 22 years |
| 50% | 17 years |
| 65% | 10.5 years |
Source: Mr. Money Mustache — "The Shockingly Simple Math Behind Early Retirement"
