In short
- Time to financial independence depends almost entirely on the percentage of your take-home pay you save — not on how much you earn.
- Saving 10% implies about 50 years of work. Saving 50% implies around 16. Saving 70% implies under 10.
- Raising your savings rate works from both ends at once: you invest more each year, and your target shrinks, because the target is a multiple of what you spend.
- A pay rise only shortens the timeline if you do not spend it. Spending it raises your target by 25× the increase.
Why the salary barely matters
Take two people. One takes home €3,000 a month and saves 30% of it. The other takes home €9,000 and also saves 30%. The second saves three times as much money every month — €2,700 against €900.
They reach financial independence at the same time.
The reason is that the higher earner is also spending three times as much — €6,300 a month against €2,100 — and the finish line is defined as a multiple of spending. Three times the savings, chasing three times the target. The ratio is identical, so the timeline is identical.
The consequence: Your retirement date is set by the gap between what you earn and what you spend, expressed as a percentage. Absolute income determines how comfortable the journey is, not how long it takes.
Savings rate to years
Starting from zero, investing everything you save at a 5% real return, and stopping at 25× annual spending:
| Savings rate | Years to financial independence | Finish age if you start at 25 |
|---|---|---|
| 10% | 50 years | 75 |
| 15% | 42 years | 67 |
| 20% | 36 years | 61 |
| 25% | 31 years | 56 |
| 30% | 27 years | 52 |
| 40% | 21 years | 46 |
| 50% | 16 years | 41 |
| 60% | 12 years | 37 |
| 70% | 9 years | 34 |
The shape of that table is the entire argument for FIRE. The conventional 10–15% savings advice implies working into your late sixties — which is exactly the retirement age most pension systems assume. It is not a coincidence; that advice was reverse-engineered from that date.
Why it is a double lever
Cutting €500 a month from your spending does two separate things, and people usually only count the first.
- 1You invest €500 more every month — €6,000 a year compounding.
- 2Your target drops by €150,000, because the target is 25 × annual spending, and you just cut annual spending by €6,000.
Spend €500/month less: Annual investment +€6,000 Target portfolio −€150,000 (25 × €6,000)
A pay rise, by contrast, only moves one end — and only if you bank it. Spend the whole rise and your savings rate falls, your target rises, and your retirement date moves further away despite earning more. This is the mechanism behind lifestyle inflation, stated numerically.
How to calculate your savings rate
Savings rate = (Take-home pay − Spending) ÷ Take-home pay
Simple in principle, contested in practice. The judgement calls that matter:
- Gross or net? Net (take-home) is the more useful number, because the table above is built on money you could actually have invested. Gross-based rates look flattering and compare badly across tax systems.
- Employer pension contributions. Include them in both your income and your savings, or exclude them from both. Counting them as savings but not as income inflates the rate.
- Debt repayment. The principal portion counts as saving — it raises your net worth. The interest portion is spending.
- Mortgage payments. Same split: principal is saving, interest is spending. Whether to count the whole thing is the most common source of wildly different numbers between two people quoting savings rates.
- One-off events. A bonus or an inheritance distorts a single year. Average across two or three to get a rate that means something.
What the table assumes
- A constant 5% return after inflation, every year, with no sequence risk. Real markets do not deliver returns in a straight line.
- A constant savings rate for the entire period. Careers, children, and illness all interrupt this.
- You start from zero. Existing savings shorten every row, often substantially.
- The 25× target, which inherits every limitation of the 4% rule — including that it was tested against a 30-year retirement, not a 50-year one.
- No state pension, no inheritance, no property sale. Any of these arriving later shortens the gap you actually have to bridge.
Treat it as a shape, not a schedule: The value of the table is the relationship it shows — that going from 15% to 30% roughly halves your working life — not the precision of any individual row. Do not plan a retirement date to the year off a constant-return model.
Frequently Asked Questions
What is a good savings rate?
Conventional financial advice suggests 10–15%, which implies working until your mid-to-late sixties. Anyone targeting early retirement is generally saving 30% or more; 50% roughly corresponds to a 16-year path from zero. The right rate depends entirely on when you want the option to stop.
How do I calculate my savings rate?
Take your take-home pay, subtract everything you spent, and divide the result by your take-home pay. Count debt principal repayment as saving and interest as spending. Use net rather than gross income, and average over two or three years if bonuses distort a single year.
Does my employer pension contribution count?
It can, as long as you are consistent: add it to both your income and your savings, or leave it out of both. Counting it as savings without adding it to income overstates your rate and makes the timeline look shorter than it is.
Can I reach FIRE on an average salary?
Yes, though it takes longer in absolute terms because a smaller share of an average income is genuinely discretionary. The timeline is set by the percentage saved, but the practical floor on spending — housing, food, transport — makes high savings rates far harder to achieve on a low income. The maths is income-neutral; the difficulty is not.
Does paying off debt count towards my savings rate?
The principal does, because repaying it increases your net worth exactly like an investment contribution would. The interest does not — it is a cost of borrowing and belongs in spending.
Put a number on it
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The information and calculations provided are for informational and educational purposes only and should not be considered financial, investment, or professional advice. Projections are hypothetical, based on assumptions that may not reflect actual market conditions. Past performance does not guarantee future results, and all investments carry risk of loss. Consult a qualified financial professional before making financial decisions.