Work, made optional
Years to retirement
Your savings rate does two jobs at once: it decides how fast your savings grow and how much you need, because what you do not spend now you will not need to replace later.
The outlook
Saving 40% of your take-home pay, you would reach $900,000 in about 22.3 years, around age 52.
- Yearly saving
- $24,000
- Target (spending ÷ 4%)
- $900,000
- Savings rate
- 40%
Years to retirement by savings rate
Point at the curve, or focus it and use the arrow keys, to read any savings rate.
Savings rate table
| Savings rate | Yearly spending | Years | Age |
|---|---|---|---|
| 5% | $57,000 | 70.1 | 100 |
| 10% | $54,000 | 55.2 | 85 |
| 15% | $51,000 | 45.9 | 76 |
| 20% | $48,000 | 39.1 | 69 |
| 25% | $45,000 | 33.8 | 64 |
| 30% | $42,000 | 29.3 | 59 |
| 40% | $36,000 | 22.3 | 52 |
| 50% | $30,000 | 16.8 | 47 |
| 60% | $24,000 | 12.3 | 42 |
| 70% | $18,000 | 8.5 | 39 |
| 80% | $12,000 | 5.3 | 35 |
| 90% | $6,000.00 | 2.3 | 32 |
How the years are counted
Target = yearly spending ÷ withdrawal rate
Your yearly saving is take-home income minus spending, added month by month to what you already have and grown at the real return you enter. The count stops when the balance reaches the target. Working in real terms (return after inflation, everything in today's money) keeps the target fixed in today's prices.
The curve shows the same calculation at savings rates from 5% to 90% of your income. It falls steeply at first and then flattens: going from 10% to 20% saves far more years than going from 60% to 70%, because a higher savings rate both adds more each year and lowers the spending the target has to cover.
Example: at 30, with $60,000 of take-home pay, $36,000 of spending (a 40% savings rate), $20,000 saved, a 4% real return and a 4% withdrawal rate, the target is $900,000 and the calculator reaches it in about 22.3 years, around age 52.
It is a simplification: income, spending and returns all change over a working life, and taxes and pensions are left out. Use it to see the shape of the trade-off rather than to fix a date.
Sources
- U.S. Securities and Exchange Commission, Investor.gov Compound Interest Calculator.
- U.S. Bureau of Labor Statistics, Consumer Price Index: the usual measure of US inflation, for choosing your own inflation assumption.
- William P. Bengen, “Determining Withdrawal Rates Using Historical Data”, Journal of Financial Planning, October 1994 (reprinted by the Financial Planning Association, 2004).
Questions
Why use a return after inflation?
Because the target is spending in today's money. Using a real return keeps everything in today's prices, so you do not have to grow the target and the spending with inflation separately.
What counts as take-home income?
What reaches your account after tax and deductions. If you already save through payroll, such as a workplace pension, add those contributions to both income and savings so the rate reflects them.
Why does the curve flatten?
At high savings rates you need very little and save a lot each year, so most of the work is already done; each extra point of savings rate trims fewer years than it does at low rates.