Savings rate calculator

How it works

Your savings rate is the part of your take-home pay that you do not spend:

savings rate = (take-home pay - spending) / take-home pay

The target is the amount that could pay your spending for good. With a withdrawal rate w, it is your yearly spending divided by w. At 4%, that is 25 times what you spend in a year.

target = yearly spending / withdrawal rate

The calculator then finds the number of years n until your investments reach the target. It assumes you invest the same amount S at the end of each year, start from what you have invested today (B), and earn a steady real return r:

n = ln((target + S / r) / (B + S / r)) / ln(1 + r)

Starting from zero, income cancels out and only the savings rate s matters. That is why the curve in the chart is the same for everyone with the same return and withdrawal rate:

n = ln(1 + r × (1 - s) / (s × w)) / ln(1 + r)

A worked example

You take home 3,000 a month and spend 2,400. You keep 600, so your savings rate is 600 / 3,000 = 20%. Your yearly spending is 28,800, so at a 4% withdrawal rate the target is 28,800 / 0.04 = 720,000. Saving 7,200 a year from zero at a 5% real return, you reach it in about 36.7 years. At 30% the same formula gives about 28 years, and at 50% about 16.6 years.

What it leaves out

• Returns are steady here. Real markets move around, so treat the answer as a guide, not a date.
• Use a real return, after inflation, because the target is in today's money. The inflation calculator shows why it matters.
• The 4% withdrawal rate comes from US research on 30-year retirements. Many people use 3.5% for longer or more cautious plans.
• Taxes, pensions and changes in spending later in life are not modelled.

For the reasoning behind the curve, read why your savings rate is the number that matters most. To find money to save, try the budget estimator.