FIRE Calculator

Your savings rate sets the date, not your salary

The finding that makes early retirement arithmetic surprising is that the years to financial independence depend almost entirely on the share of income you save, not the amount. Saving 10% of your income takes roughly fifty years from zero; 25% takes about thirty; 50% takes about seventeen; 65% takes around ten.

The reason is that every extra point of savings rate works twice. It raises the amount going in and lowers the spending the pot eventually has to support. A raise you spend moves the date barely at all; a raise you save moves it twice.

Where the 4% rule came from, and what it assumed

The 4% figure comes from studies of historical US market returns, asking what withdrawal rate would have survived every thirty-year window including the worst. It is a useful anchor and a poor law.

Three assumptions matter. It was derived from US returns, which were among the best of the twentieth century; the same test on most other markets gives a lower safe rate. It was tested over thirty years, so retiring at forty asks it to do something it was never tested for. And it assumes a portfolio heavily weighted to equities, held through the crashes without flinching.

Retiring early on a long horizon, many people work from 3.25–3.5% instead, which is the difference between needing 25 and 30 times your spending. Adjust the withdrawal rate above and watch the target move — it is the most consequential input on the page.

Sequence risk is the thing that actually breaks plans

Two retirements with identical average returns can end very differently depending on when the bad years arrive. A crash in the first five years, while you are selling assets to live on, does damage that later good years cannot undo. The same crash twenty years in is survivable.

This is why a cash buffer of one to three years' spending matters more than its modest return cost suggests. It lets you avoid selling into a fall, which is the mechanism by which sequence risk does its harm.

What this model simplifies

• Returns are steady here; real ones are not. A smooth line gives a single date where reality gives a range.
• Tax is not modelled. Where your money sits — pension, tax-advantaged account, or ordinary brokerage — changes both what you accumulate and what you can reach before pension age.
• State and workplace pensions are separate. They start later, which is why many plans need a larger bridge to pension age and a smaller pot after it.
• Health cover. In countries without universal coverage this is one of the largest line items in an early retirement, and the gap before state eligibility is the expensive part.