This Chart Shows When You Can Finally Retire Based on Your Savings Rate.
When you become financially independent, there are three factors: the age at which you start saving, the size of your savings, and the return on investment. This chart shows how important all of this is to retirement.
Heat Map is a Google Spreadsheet created by Radical Personal Finance commentator Philip Frey. Based on a conservative 4% rate of return, it will tell you if you can retire by age 40 (green), 50 (yellow), 65 (red), or over 65 (gray).
According to My Money Blog :
I believe the assumptions include: (1) both income and expenses are after taxes, (2) once you increase spending 25x, you achieve financial independence (4% safe spending rate), and (3) external pensions, and social security is ignored. … It’s not perfect and I wouldn’t take the exact numbers from this chart, but it’s still a great visualization.
It is also assumed that you have been saving the same percentage of your income continuously since you started investing. Other online tools can give you a better estimate and plan for retirement, but the chart does provide one important lesson: your savings rate is the only thing you can control when it comes to financial independence. (For another estimate, here’s a rule of thumb for how much you should have in your retirement account by age if you want to retire by age 67).
Here’s a diagram. You can copy the table to change the 4% interest rate to something else for different results if you like.
Savings speed to financial independence through radical personal finance