Three factors influence when you’ll be financially independent: the age you start saving, how much of your income you save, and the return on your investments. This chart illustrates how critical these all are to when you can retire.
The “heat map” is a Google spreadsheet built by Radical Personal Finance commenter Philip Frey. Based on a conservative 4% return, it will tell you if you can retire by age 40 (green cells), by age 50 (yellow), by age 65 (red), or past 65 (gray).
According to My Money Blog:
I believe the assumptions include (1) both income and spending numbers are after-tax, (2) once you reach 25 times expenses you reach financial independence (4% safe spending rate), and (3) outside pensions and Social Security are ignored. It’s not perfect and I wouldn’t take hard numbers from this chart, but it’s still a neat visualization.
It also assumes you have consistently been saving the same percentage of your income since you started investing. Other online tools can give you a better estimate and plan your retirement, but the chart does pound in one important lesson: your savings rate is really the only thing you can control when it comes to getting financially independent. (For a different 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 the chart. You can copy the spreadsheet to change the 4% interest rate to something else for different results if you like.
Savings Rate to Financial Independence via Radical Personal Finance