The formula
How to calculate financial independence
Financial independence is the point where investment income covers your costs and work becomes optional. This measures how far along you are, which is more useful month to month than a distant target figure.
Count only assets that could produce income: pensions, ISAs, general investment accounts, income-producing property. The house you live in does not qualify unless you intend to sell it.
The inputs, one by one:
- Invested assets — exclude your home and anything you could not draw an income from
- Annual spending
- Withdrawal rate (%)
Results appear immediately — there is nothing to submit. Changing a field rewrites the link, so you can share the exact scenario you are looking at.
Worked example
Work through the defaults on this page:
- Invested assets: 320,000
- Annual spending: 38,000
- Withdrawal rate: 4 %
That gives:
- Progress to independence: 33.68 %
- Target portfolio: 950,000
- Still to accumulate: 630,000
Reading the result
Progress accelerates in a way that feels wrong at first. Going from 0% to 25% takes far longer than 75% to 100%, because in the later stretch market growth on a large balance contributes more each year than your own savings do.
Where this goes wrong. Letting spending rise as the portfolio grows. Every extra £1,000 a year of spending adds £25,000 to the target at a 4% rate, which can push the finish line away faster than you approach it.
No. It means the income is no longer required. Plenty of people reaching independence keep working, change to something lower paid, or go part-time — the difference is that it becomes a choice.
Include them in the total, since they will eventually fund your spending, but plan the bridge separately. Independence at 45 with everything locked in a pension until 57 is a sequencing problem, not a wealth problem.
The headline figure is progress to independence. With 320,000 invested assets, 38,000 annual spending and 4 % withdrawal rate, that comes to 33.68 %. Change any field and the figure moves with it.