Years to FI by Percent Saved Chart

[Gilberto de Piento]

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.

[Ian]

The differences on the right end of the graph are striking, considering that many people could manage that kind of saving just with more intelligent spending (not even giving up anything).

Unfortunately, these charts don't apply to me because, like many people, my pre- and post-retirement spending aren't the same. You could turn this around (measure years of expenses saved per year instead of saving rate), but in my case I don't know that either because of several major variables.

[steveo73]

I like these charts/figures however for me personally its not as simple as what they suggest simply because the cost of housing where I live is really high.

I think those figures are fairly accurate if I assume that I'm starting from when my house is paid off. In saying that I think the best way to view retirement is investment income > living expenses.