Years to FI by Percent Saved Chart
Posted: Wed Aug 13, 2014 9:37 am
I put together a spreadsheet to look at the impact that savings rate has on time to financial independence. It's intended to be generic so it doesn't include taxes or inflation and is based on 8% interest rate and 4% withdrawal rate. Nothing groundbreaking, I just like charts. I thought some of you might find it interesting:
Assuming I calculated correctly, there appears to be an inflection point around 25% or so. For example, there is more gained in increasing your savings rate from 10% to 15% than there is from increasing from 50% to 55% (not to say don't do this, just to say that the reduction in years to FI isn't as large).
As you'd expect, it supports the usual rules of thumb:
1. Jacob says you can retire in a few years saving nearly all of your paycheck
2. Save 15% and retire at the usual age (30 years or so from when you start working)
I ran it with different interest rates and the curve looks the same but the years to FI increases or decreases depending on the direction you go.
Assuming I calculated correctly, there appears to be an inflection point around 25% or so. For example, there is more gained in increasing your savings rate from 10% to 15% than there is from increasing from 50% to 55% (not to say don't do this, just to say that the reduction in years to FI isn't as large).
As you'd expect, it supports the usual rules of thumb:
1. Jacob says you can retire in a few years saving nearly all of your paycheck
2. Save 15% and retire at the usual age (30 years or so from when you start working)
I ran it with different interest rates and the curve looks the same but the years to FI increases or decreases depending on the direction you go.