Do I need a high income to retire early?
No. How long it takes depends on your savings rate, not your income.
- Pickles and Waffles both retire in
- 17 years
- Pickles earns
- $50,000 /yr
- Waffles earns
- $200,000 /yr
Different pay, same retirement date
| Pickles | Waffles | |
|---|---|---|
| Earns /yr | ||
| Saves /yr | ||
| Spends /yr | ||
| Needs | ||
| Retires in |
Different net worth, same retirement date
Pickles Waffles
About these numbers
The same assumptions as the early retirement calculator: both start from nothing, earn 5% a year after inflation, and retire when 4% of their savings covers a year of spending. That means saving 25 times what you spend in a year.
Why income cancels out
Earning more lets you save more, but if you save the same share, you spend more too. A bigger lifestyle needs a bigger nest egg to pay for it. Save four times as much a year and you need four times as much in the end, so you get there at the same time.
What does help is a higher savings rate. It works twice: you put more away each year, and you need less, because you've learned to live on less.
What income does change
A higher income makes a high savings rate easier. Rent and food take most of a small paycheck, so saving half of $30,000 is much harder than saving half of $200,000. And the higher earner retires with a bigger cushion for surprises. But on the same savings rate, both people reach retirement at the same time.