What is a good savings rate?
20% of after-tax income is 'good' for traditional retirement by 65. 30–40% is 'great' and gets you to FI by your 50s. 50%+ is 'exceptional' and enables retirement in 15–17 years regardless of income level. The national average is only 4–8%, which leads to working until 65–70.
Formula
Savings Rate = (All Savings + Investments + Extra Debt Payments) ÷ Gross Income × 100%
Example
Gross $8,500/month. 401k: $1,917 (23.5k/year). Roth IRA: $583. Brokerage: $400. Extra mortgage: $200. Total savings: $3,100/month. Rate: 36.5% → on track for FI in early 50s.
How it works in detail
Your savings rate is the single most important financial number because it simultaneously increases what you invest and decreases what you need (your retirement target is spending-based, not income-based). Savings rate tiers: 5–10% = retiring at 65–70 (national average), 15–20% = retiring at 60–62 (solid), 25–35% = retiring at 55 (ahead of schedule), 40–50% = retiring at 47–50 (early retirement), 60%+ = retiring in 10–12 years (aggressive FIRE). Calculate it: (Total Monthly Savings including employer match) ÷ (Gross Monthly Income) × 100. Include 401k contributions, IRA, brokerage, HSA, extra debt payments. Don't include employer match in numerator if you don't include total comp in denominator.
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What is a FIRE number and how do I calculate mine?
Your FIRE number is 25× your annual spending — the portfolio size where a 4% withdrawal covers your expenses indefinitely. If you spend $50,000/year, your FIRE number is $1,250,000. It's the threshold for financial independence.
What savings rate do I need to retire early?
At a 50% savings rate, you can retire in roughly 17 years. At 65%, about 10 years. At 75%, about 7 years. The relationship is logarithmic — your savings rate matters far more than your income or investment returns for determining time to financial independence.
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