Savings Rate and Years to FI

The math

Savings rate = (income saved) / (income earned), after taxes. If you earn $100k take-home and save $25k, your savings rate is 25%.

The surprising result: savings rate is more predictive of years-to-FI than income level. A teacher saving 30% of $50k reaches FI at about the same age as a doctor saving 30% of $300k — they just live on different absolute amounts in retirement.

This is because savings rate has a double effect:

• It increases the rate at which you accumulate the portfolio.
• It decreases the size of the portfolio you need, because your spending is what you didn't save.

Both effects compound. Going from 15% to 30% savings rate doesn't just double the accumulation rate — it also cuts your required portfolio target because you've trained yourself to live on 70% instead of 85% of income.

The table

Assuming 5% real investment return, starting from $0:

These assume you live on what you don't save, in retirement and in working years. FI is defined as 25× annual spending.

Key takeaways:

• The curve is highly non-linear. The first percentage points of savings rate don't buy much; later ones buy enormous reductions in working years.
• Almost nobody saves 5% and actually reaches retirement — by the time you hit traditional retirement age at that rate, you're roughly even on Social Security alone.
• Saving rates above 50% are the domain of the FIRE (Financial Independence, Retire Early) community. They're aggressive but achievable for high earners willing to compress lifestyle.

Practical savings rate targets

"On track for a 65-year-old retirement": 10–15% savings rate starting in your 20s, or 15–20% starting in your 30s.

"Ahead of the curve": 20% starting in your 20s, or 25% from 30 onward.

"Aiming to retire at 55": 25–30% sustained across your career.

"FIRE — retire by 45–50": 40%+ savings rate sustained.

"Lean FIRE or barista FIRE by 35–40": 60%+ savings rate, often combined with moving to low-cost-of-living area.

What counts

Different analyses include or exclude:

Always include:

• Contributions to 401(k), IRA, Roth IRA, HSA, taxable brokerage
• Employer match (some analyses exclude this as "extra" return, not savings)
• Principal portion of mortgage payments (you're converting cash to home equity)

Sometimes excluded:

• Emergency fund contributions (these aren't "invested")
• Mortgage principal (debate over whether it counts)
• Down payment savings for a first home

Never included:

• Money earmarked for large upcoming expenses (wedding, car purchase)
• Debt payoff (you're reducing liabilities, but not building an asset)

Pick a consistent definition and use it over time to track progress.

Why lifestyle restraint matters so much

Saving rate rises two ways: earning more and spending less. Both work, but spending restraint is more powerful for three reasons:

1. Earnings get taxed; expense reductions don't.
2. Every $100 of permanent expense reduction is worth $2,500 of portfolio at 4% SWR.
3. Lower spending trains you for a lower-spend retirement, reducing the target.

A worker who gets a $20,000 raise but lets lifestyle inflate by $15,000 has only a $5,000 increase in savings. A worker who cuts $10,000 of spending has the same effect as a $15,000+ raise, depending on tax situation.

How Horizons uses this

Your Horizons budget determines your monthly surplus. The engine treats surplus above your Budget Rules' discretionary threshold as savings, applying it to the accounts and goals you specify. The long-range forecast reveals what savings rate you're actually running and how that pace compares to your retirement target.