The formula
How to calculate savings multiple
A savings multiple states your net investments as a number of years — of income, or of spending. It is the standard way retirement readiness is benchmarked, and it strips out the scale differences that make raw balances hard to compare.
Two versions are in use. Financial planners benchmark against income, with rough milestones of 1× by 30, 3× by 40, 6× by 50 and 8–10× by retirement. The FIRE community benchmarks against spending, because that is what the portfolio actually has to cover.
Fill in the following:
- Invested assets
- Annual income
- Annual spending
The result updates on every keystroke. The URL updates too, which makes the filled-in version easy to bookmark or send to someone else.
Worked example
Take the figures the calculator starts with:
- Invested assets: 250,000
- Annual income: 62,000
- Annual spending: 38,000
That gives:
- Multiple of income: 4.03 ×
- Years of spending: 6.58 ×
- Progress towards 25× spending: 26.32 %
Reading the result
The gap between the two multiples is a measure of your savings rate. Someone spending most of what they earn will see the two figures close together; a high saver will see the expense multiple run far ahead of the income one.
Where this goes wrong. Counting home equity. It inflates the multiple without producing any income, and the standard benchmarks were never built to include it.
The common planning benchmark is about three times annual income, but it assumes a conventional retirement age and a state pension. On the spending measure, three times annual expenses at 40 puts you around 12% of the way to independence.
The one based on spending, because retirement is funded against costs rather than against a salary you will no longer receive. The income version is mainly useful for comparing yourself with published benchmarks.
It returns multiple of income. With 250,000 invested assets, 62,000 annual income and 38,000 annual spending, that comes to 4.03 ×. Change any field and the figure moves with it.