≡ Menu

Save 50% Retire Early?


save 50%Does saving 50% really work? Would saving 50% of your income enable anyone to retire early? How long would it take? First of all, saving 50% of your income is a tall order. Most people need to spend a significant amount of money to live a comfortable lifestyle. That comfortable lifestyle cost way more than 50% of income for the average household. Also, your expenditure tends to rise with your income. If you make a lot more income than the average household, your expense is usually much higher too. Most people just can’t bring themselves to save 50% of their income even if they make a lot of money.

Second, I heard that it’d take about 17 years to retire early if you save 50% of your income. Mr. Money Mustache made a spreadsheet a long time back. However, that was based on an unrealistic early retirement calculator from Networthify. The annual income and expenditure were constant. That doesn’t work because of CPI inflation (price) and lifestyle inflation. It’s impossible to keep expenditure the same for 10 years, let alone 70 years. We’ll add a few more variables and do the math today. Then, we will how long it would really take to retire early if you save 50%.

The Average US Household

The Bureau of Labor Statistics hasn’t released the 2018 consumer expenditures yet so we’ll go with the 2017 numbers.

In 2017, the average household made $73,573 before taxes. And they spent $60,060. The rest went to taxes and savings.

The average federal tax rate for that income range is about 9%. We’ll estimate the local taxes and savings.

  • Income: $73,573 (from BLS)
  • Expenditure: $60,060 (from BLS)
  • Federal taxes: $6,622 (9%)
  • Savings: $4,414 (6% from Trading Economics)
  • State and local taxes: $2,477 (~3% estimated)

As we can see, the average US household isn’t saving enough. That is understandable, though. Last year, we spent $60,835 and we live pretty modestly. There were a few lumpy expenses like replacing the HVAC and a couple of long trips. However, that’s not unusual. There are always a few big expenses every year. The biggest problem was our housing cost. We spent $28,420 on housing last year. That’s 47% of our annual expenditure. This year will be better, though. We moved into our duplex and our housing cost should decrease significantly in 2019. Fortunately, our income was excellent and we were able to save more than 50% last year. Most households can’t do that.

The problem for the average US household is 2 fold. They don’t make enough income and they spend too much. They’ll need to increase their income and save much more to reach the 50% threshold. I’ll have to write another post to cover that topic. Today, we’ll focus on the math and figure out how long it’d take to retire if you can save 50%.

Save 50%

Here we go – I made a Save 50% spreadsheet on Google Sheets. You can check it out and copy it to mess around with the variables. To make a copy, just click “File > Make a copy.” This will make a copy in your own window and you can change the numbers there.


  • Earned income: $75,000. This one isn’t that important because we are looking at the percentage.
  • Initial Saving Rate: 50%. This is the saving rate you start off with. We’ll assume the family somehow managed to save 50%.
  • Annual Raise: 5%. To be more realistic, we’ll add an annual raise.
  • Spending Increase: 5%. We’ll assume the expenditure increases too. For now, we’ll keep it even with annual raise. This will keep the saving rate at 50% throughout. This number is extremely important. Update – I split this into spending increase (3%) and inflation (2%.)
  • ROI: 7%. We’ll assume a conservative 7% annual gain for our investment.
  • Post Retirement Income: 0%. For now, we’ll assume there is no earned income after retirement.
  • Initial Savings: $200. This is what you start out with.
  • Target Withdrawal Rate: 4%. We’ll use the 4% withdrawal rate.


Here are the numbers for saving 50%.

save 50% spreadsheet

With our assumption, it will take 20 years to achieve our target. After 20 years, our portfolio will be able to support a 4% withdrawal rate. That’s not too bad.

Save 50% retire in 20 years


However, there is a big problem down the road. Once this family retires, their income will drop to zero. The annual expenditure increase is still set at 5%. That’s not unreasonable, but it adds up over the years. After 33 years of retirement, they’ll run out of money.

early retirement

The 5% spending increase isn’t sustainable. Their expenditure will outpace their passive income. The retirement savings will be depleted after 33 years.


One way to solve this problem is to limit the spending increase. Even decreasing it from 5% to 4% will help tremendously. That 1% makes a big difference over the long haul. However, this would mean increasing the saving rate gradually. The saving rate starts out at 50% and increases to nearly 60% after 20 years.

Anyway, it looks like we need about a 3% spread between spending increase and ROI for the retirement portfolio to last 50 years. This is a simple spreadsheet, but the lesson is clear. We need to avoid spending more than the portfolio can support. To be safe, the ROI needs to be about 3% higher than the annual spending increase.

There are other ways to improve the numbers too.

  • Work a bit after retirement to bring in some income. I added a post-retirement income variable to the spreadsheet. Adding 10-20% of the pre-retirement income back can help a lot. A little active income goes a long way in early retirement.
  • Interestingly, dropping both the annual raise and spending increase to 4% worked too. This kept the saving rate constant at 50%. Having the 3% spread between spending increase and ROI really helps.
  • Lowering the spending increase after retirement should help a lot too. However, I don’t think people can change after 20 years. If you want to limit the spending inflation, you’ll need to start while you’re working.

Early retirement is possible

Anyway, saving 50% will enable you to retire earlier. We just need to keep a close eye on the retirement portfolio and make sure not to withdraw too much.

Check out my Google spreadsheet and play around with the variable. Retirement is possible in less than 20 years. We just have to make sure to limit the spending inflation so we don’t run out of money too early.

Well, what do you think? Do you like my spreadsheet? Let me know if I need to add any more variables.

As for how to save 50%, that’s another long topic. I’ll have to write a follow-up post on how to save 50%+. Basically, you have to make more and spend less. Easy to say, but difficult to do.

Lastly, if you haven’t tried it yet, check out Personal Capital’s Retirement Planner. It is one of the best retirement planners online. You can add events like retirement, Social Security benefit starting, kid’s college, and more. They’ll look at your current investment portfolio and see if your retirement will be successful. It is very neat. Better yet, this is a free service. They’ll only charge a fee if you want them to manage your portfolio. You can use Personal Capital to track your cash flow too. It’s a great site for DIY investors.

Sign up with Personal Capital to use their free retirement planners, 401k fee analyzer, and cash flow tracker.

Personal Capital Retirement Planner


The following two tabs change content below.
Joe started Retire by 40 in 2010 to figure out how to retire early. He spent 16 years working in computer design and enjoyed the technical work immensely. However, he couldn't stomach the corporate BS.

Joe left his engineering career behind to become a stay-at-home dad/blogger at 38. Today, he blogs about financial independence, early retirement, investing, and living a frugal lifestyle. See how he generates Passive Income here.

Joe highly recommends Personal Capital for DIY investors. He logs on to Personal Capital almost daily to check his cash flow and net worth. They have many useful tools that will help DIY investors analyze their portfolio and plan for retirement.
{ 44 comments… add one }
  • Mr. Tako March 11, 2019, 12:15 am

    Sure, I believe it! It only took me 15 years, and I never earned a huge salary either! (Just slightly above the average salary)

    Anybody can do it, you just have to consistently save. Not everyone is wired that way I guess. There’s also some variation in what people call a “comfortable lifestyle”.

    For some people that means driving brand new luxury cars, furniture that all matches, designer handbags, and 4 star hotels on vacation. For another person that might mean a good quality used car, hand-me-down furniture, a ‘no-brand’ handbag, and a 3 star motel on vacation.

    • retirebyforty March 11, 2019, 11:06 am

      You’re right. A comfortable lifestyle for us is pretty moderate, but it still cost $60,000… This year should be better, though. Our housing cost will drop a bit now that we’re done moving.

    • Educator on FIRE March 13, 2019, 5:27 pm

      I believe, as well. This and other FIRE resources certainly help.One question that would be great to have feedback on involves housing.

      With the median home price appreciation in the US growing by more than $100,000 in the last 10 years (https://bit.ly/2OmF2cn) it appears to be increasingly difficult to save anywhere close to 50% income. If housing/mortgage/rent is half of take-home pay ($1,600/month on a $250,000 home with 10% down for 30 years at 4%) I’m not seeing how this could be done.

      Are people who are able to save 50% living with family? Moving to areas with extremely low prices on homes? Something else? Thanks.

      • retirebyforty March 13, 2019, 5:39 pm

        Housing is a big problem for many of us. Here are some ideas.
        – Make more money. I know. That’s difficult for many people.
        – Shared housing. This is easier if you’re single. One of my friends purchased a 4 bedroom house and rented out 3 rooms when he was young.
        – Buy a duplex, rent one unit, and live in the other. We’re doing this. It’s not ideal, but we can live with it.
        – ?

  • Robin March 11, 2019, 12:22 am

    Good pragmatic logical sense!
    If you can save 50% of your income it means for each year worked, that you have put a years worth of living expenses in savings. If you work 10 years you have 10 years savings in savings, but if you invest that 10 years worth of savings – its becomes more and can generage income to allow a switch over to not working at all at some stage.
    Excellent article – thanks!

  • Little Seeds of Wealth March 11, 2019, 12:31 am

    Great reminder on why it’s so important to keep expenses grow at a slower rate than income. I love the spreadsheet and how simple it is. Illustrates your point very clearly.

    • retirebyforty March 11, 2019, 11:12 am

      Exactly! Over the long haul, 1% can make a big difference. We need to keep expenditure inflation under ROI by a good margin.
      We can’t control ROI, but we could control spending.

  • Adam March 11, 2019, 1:48 am

    Anyone who can save 50% is pretty hardcore already, so why assume any spending increase over cpi? More likely to be a decrease.

    First year on the FIRE trail we saved 65%. Since then our incomes have increased and our expenses have decreased… as with anything, you get better at frugal life as you learn the tricks.

    Fourth year and we are on track for 80% saving rate (possibly optimistic but it’ll be close), last year was 74%. Expecting to be done well under 10 yrs.

    • retirebyforty March 11, 2019, 11:14 am

      You’re doing a great job. That’s why I have 2 variables – one for income increase and one for expense increase.
      It really depends on where you are in life, though. Once you get older, you’ll probably spend a bit more. Which is perfectly fine.
      Kids and other stuff complicate the picture too. 80% is awesome.

  • Dave @ Accidental FIRE March 11, 2019, 1:49 am

    You didn’t include room for a $39,000 SUV in your calculations. Oh wait, that comes back to the “savings” part. Got it. 🙂

    I like it Joe!

    • retirebyforty March 11, 2019, 11:14 am

      I’m hoping for self-driving car soon. Then, I won’t need to by a replacement vehicle. 🙂

  • Pennypincher March 11, 2019, 6:19 am

    Interesting, Joe.
    Can’t wait for the comments to roll in.
    Even if you sit down and think of all the variables, the expected and unexpected expenses, inflation, medical costs, car, HVAC, roof replacement, you name it, it’s still a shocker when you drop big $$ for these things.
    Save, save, save people. And put it on auto pilot w/direct deposit.
    You can still enjoy your life.

    • retirebyforty March 11, 2019, 11:16 am

      Of course, you’re right. Life isn’t a spreadsheet. There are too many variables.
      We’ll just have to be vigilant and flexible. Thanks!

  • Jim @ Route To Retire March 11, 2019, 6:27 am

    I like your spreadsheet – I’m familiar with the Networthify calculator, but hadn’t paid much attention to to the considerations. You’re right that it leaves out some important variables. I’m also a big fan of the Personal Capital Retirement Planner you mention – it takes into consideration a lot of variables, but still keeps the usability fairly simple.

    I’d have to say that I think the two keys to early retirement are intentionality and flexibility. Being intentional on your spending and income decisions can get you to early retirement. And flexibility can be the key to not running out of money once you’re there. If you have those two characteristics mastered, you’ll probably be able to reach FI sooner than you think.

    — Jim

    • retirebyforty March 11, 2019, 11:17 am

      Great points about intention and flexibility. We might be a little bias, though. We spend intentionally and we’re pretty flexible. Most people don’t do that. They’ll have to work on it a lot more.

  • Dr. McFrugal March 11, 2019, 7:43 am

    Nice spreadsheet. I have to give it a go.

    Looks like keeping lifestyle inflation in check is definitely key to making early retirement work.

    • retirebyforty March 11, 2019, 11:18 am

      As long as the spending inflation is a few percentages below income, I think it’ll be fine. Your income increased tremendously so you have plenty of room to relax.

  • Xrayvsn March 11, 2019, 7:44 am

    Wow Joe, I have to say that I was surprised with how the numbers played out.

    I honestly thought if someone could save 50% of their income the would reach FI much earlier than even the 17 years from the MMM example and certainly didn’t think it would take 20 years.

    My scenario will play out a lot differently as the income I have is quite large while my living expenses are minuscule in comparison. A lot of calculators out there assume you need 80% of your working income to retire on. That would way overshoot the number I truly need.

    I sort of pulled out a number of my head and thought $125k/yr withdraw would provide quite a nice lifestyle. This is a very small percentage of what I’m bringing in now (probably less than 14%). So I know with my high savings rate currently, I think just a few more years and I will have a comfortable safety net built to support that draw.

    • retirebyforty March 11, 2019, 11:20 am

      Wow, your income is great. You’re well on the way to FIRE even with several big stumbles. Keep at it!
      $125k/year would be very comfortable for us too. 🙂

  • Dividend Deluge March 11, 2019, 8:12 am

    Interesting post! I have been saving about 40-50 % of my income for the past seven years and I don’t think I could retire in 10-15 years, because I don’t want my partner to work full-time after I am financially independent. My current goal is to earn enough passive income to support two part-time workers, which is a goal that I can actually achieve in 10 years.

    • retirebyforty March 11, 2019, 11:22 am

      Keep at it! You’ll get there soon. The part-time income will make a huge difference. I think you’ll be surprised.
      I’ll add “initial savings” tonight. Then you can use it to do a projection.

  • freddy smidlap March 11, 2019, 8:28 am

    a big decrease in our spending came when we paid off our house. y’know, i never calculated our savings rate when we were both working. you would hope that some typical expenses like childcare and housing would drop to zero eventually but we all know the average consumer would just use it as play money versus saved/invested money.

    • retirebyforty March 11, 2019, 11:24 am

      The drop in childcare helped us for just 1-2 years. After that, the expense increased back to the previous level. Kids still cost money even without daycare expense. Also, inflation is relentless.

  • Angela @ Tread Lightly Retire Early March 11, 2019, 8:38 am

    That future costs bit is a big deal. The one note I have at least for us is that we are currently spending a decent chunk on childcare, and moving forward that number should be less once the kiddo starts school, even factoring in a sport. Sound logic though overall, and one the simplistic discussions of savings rate to early retirement date tend to overlook.

    • retirebyforty March 11, 2019, 11:25 am

      Yes, keep track of it. Our childcare expense dropped to almost zero, but our total expenditure soon rose back to the same level.
      I need to go back and see why. It’s probably the vacation spending that increased our annual spending. We didn’t travel much when our son needed childcare. Now, we have to pay for 3 tickets everywhere…

  • Abigail @ipickuppennies March 11, 2019, 10:45 am

    Interesting points. I’m definitely curious what a “comfortable lifestyle” entails and whether spending really would increase 5% every year. I just got out of being married to a spender so I can’t really say for sure what my increase will be each year now that it’s just me.

    I think the biggest issue is that the average household doesn’t mean the average salary. And given some of the pretty huge salaries out there, I’d be more interested in knowing the median salary.

    • retirebyforty March 11, 2019, 11:27 am

      Well, the increase is a variable in my spreadsheet. I think you’re golden if you limit it to 3%. That’s probably very difficult, though.
      We all want to be a bit more comfortable as we age.

  • Life Outside The Maze March 11, 2019, 10:57 am

    Interesting Joe, I think you hit it on the head when you said “The problem for the average US household is 2 folds. They don’t make enough income and they spend too much.” Your math seems sound but if you are going to be diligent and work to get to FI why not also do the work early on to up your household income above $75K? For us, we reached FIRE super fast because we both worked and spent little. MMM wrote a post listing a bunch of jobs to make over $50K a year with no college degree. If you can get household combined income of $100-150K and hold your spending low, then FIRE starts to come really fast right?

    • retirebyforty March 11, 2019, 11:29 am

      The income doesn’t matter that much on this spreadsheet since we’re looking at percentages anyway.
      Most household making $100k still spend 90% of it. It’s difficult to live frugally when you make more money.
      If you can do it, you’re way ahead of the pack. Keep at it!

  • Young FIRE Knight March 11, 2019, 11:03 am

    Great post Joe and some really good points you make that everyone needs to keep in mind.

    The lifestyle creep can hit anyone, but ensuring you can keep your base expenses low with super charge your savings rate which would hopefully help that grow and bring your time to FI down!

  • Vicky March 11, 2019, 11:48 am

    I’m a big believer in that at a certain point in life expenditure actually decreases. I base that on observations of the elderly in our life. From what I’ve seen after 70 travel decreases, peer groups die off and dining out costs decrease as do most costs associated with socialisation. Even food costs, we are mid 50s and find we eat and consume less alcohol now than we did 5 years ago. Sure medical costs might go up with more co pays etc. but that shows the importance of positioning yourself in a country which does not rape and pillage for medical insurance premiums and costs like the USA.

    • retirebyforty March 11, 2019, 12:52 pm

      Thank you for your input. I think that’s probably the case for most people. However, our cost of living is already reasonable. I don’t think it will really decrease much. The housing cost could go down a bit, but that’s the only big thing. We’d have to move to lower our COL.
      That’s probably true for most of the people pursuing FIRE.

  • DB March 11, 2019, 11:51 am

    You mention that your housing cost is reducing due to moving to Duplex and selling your condos. Do you still think having rentals was a good investment in the long run? Did rental income not cover enough of the housing cost?

    • retirebyforty March 11, 2019, 12:54 pm

      Yes, I think rental properties are great for long term wealth building. Our housing cost will decrease, but our passive income will decrease too.
      We’ll have to see how it hash out the rest of this year. There are other issues with being a landlord. I need to spend more time out of town now and Mrs. RB40 doesn’t want to deal with it. We also want to simplify our life.

  • Lily March 11, 2019, 4:49 pm

    Wow that 1% really does make a huge difference! I used the 2.5% Mr. Tako recommended but some people think it’s too conservative. I did the math and it scared me, for us to have a B+/A- dream life, we would need $166k and no one believes me until I show them the math. When you have elderly parents, kids, and living in a higher cost area – that’s just how it is. I don’t even think FIRE is possible for us in 20 years!

    • retirebyforty March 12, 2019, 4:22 pm

      2.5% is pretty good, but it is very conservative.
      You guys probably have to drop it a bit. $166k/year is very cushy. 🙂
      The high COL area is the key. I’m willing to move to a lower COL after our son is done with school.

  • Done by Forty March 11, 2019, 9:10 pm

    It’s so interesting to see the havoc that increases in spending, even something just barely above inflation, causes to FI plans: both in the accumulation phase and post-FI.

    Small increases really do a number on the numbers. We might need to look in to ways that artificially decrease our spending (like paying off the mortgage).

  • Preston March 12, 2019, 9:19 am

    Shouldn’t the spreadsheet have an input for inflation rate? Or is this analysis assuming 2019 dollars throughout, in which case some of the other numbers (like ROI and raise) should be reduced by ~2%.

    • retirebyforty March 12, 2019, 4:23 pm

      I’ll add inflation. It’s kind of built in with the 5%, but it’ll be easier to see if we separate it out. Thanks!

  • J20 March 12, 2019, 9:31 am

    If they bought a house. It freezes their housing cost for a large portion perhaps 40% of their total expenditure. Except for nominal property tax increase. Rerun the model and you should be able to drop down the number of years drastically. This is a key variable in the equation.

    • retirebyforty March 12, 2019, 4:24 pm

      I’m not sure I agree. A house still cost a lot of money even after it is paid off.
      My brother is paying $24k/year in property tax! But he lives in California.
      Anyway, the property tax is always increasing. Repair and maintenance, furniture, remodeling, and other housing-related expenses are high too. The mortgage is just one part of it, IMO.

  • Sport of Money March 12, 2019, 11:01 pm

    Hi Joe – does your spreadsheet factor in income taxes (federal and state/local) paid on the passive income and the 4% withdrawal amount? Income taxes could be a decent size expense 20 years from now.

    Aiming to save 50% is a great goal to turbo charge you along the path of financial independence. I do wish the general population has a better appreciation and knowledge for the % of savings in order to achieve financial independence. Save 50% now and work for only 20 years, sounds like a great deal to me.

  • David @iretiredyoung March 13, 2019, 2:25 am

    I like your spreadsheet and the post because it adds to people’s awareness. Even if 50% is higher than most can achieve, it hopefully gets people thinking about their income, costs and savings, and what changes could perhaps be made to achieve their saving or FIRE objectives

    I have a concern about people’s costs, and wondered if you shared it. With interest rates at such low levels, it seems they can only get higher in due course which will make some people’s housing costs increase significantly. This could make a real dent, or worse, in their saving plans. What do you think?

  • GYM March 13, 2019, 11:17 pm

    Great spreadsheet Joe 🙂 So many variables including income and expenses, and timing too. If someone invested their money after the crash they would do well with early retirement. I wonder if the 10 year bull market has anything to do with the high amount of FIRE enthusiasts.

Leave a Comment

This site uses Akismet to reduce spam. Learn how your comment data is processed.