The Savings Rates chart displays the full range of savings percentages required to meet your financial goal no matter what happened in the markets. Use this to determine minimum savings requirements, identify the safe savings rate, and study the impact of your career and money choices on reaching your important milestones.
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How To Interpret The Chart
The purpose of the Savings Rates chart is to help you determine the amount of savings you should target in order to meet your financial goals. It does this by looking at every investing start date since 1970 and calculating the annual contribution required to meet the goal in each unique case. By displaying the full range of results on the same chart, it illustrates the varying savings experiences of different real-world investors and gives you a feel for realistic savings targets for your own financial situation.
Minimum Savings Rate
The Minimum Savings Rate (MSR) is the percentage of income saved that achieved the target financial goal in the single best historical timeframe to invest in that particular portfolio. So while it worked out for people lucky enough to start investing in that year, there’s a good chance it might not be enough to meet the goal on your own particular timeframe.
Safe Savings Rate
The Safe Savings Rate (SSR) is the percentage of income saved that achieved the target financial goal in the single worst historical timeframe to invest in that particular portfolio. While there’s no guarantee that the future won’t set a new low, this is a good measure of a savings rate that is highly likely to meet your goal.
If you see an “X” at the 100% line, that means that the required savings to meet the goal was higher than your annual income. A blue X means that the there were some situations where there was no viable savings solution, and a red X means that there were no savings solutions even in the best time to invest. If that happens, perhaps think about how to increase your income or re-think your goals.
No Savings Needed
If you see a “+” at the 0% line, that means that the goal was reached using the natural growth of the portfolio with no additional savings at all. A red X means that there were some particularly favorable markets where additional savings was not required, and a blue X means that you’re already so far along that the goal was met without new money even in the worst case. If that happens, it doesn’t mean that you should stop saving! But you should feel pretty confident in your progress and might start thinking about even bigger goals.
- All numbers are expressed in today’s currency values and are adjusted for inflation. So for example, a target of $1,000,000 in 30 years represents $1,000,000 in today’s dollars. The nominal future account value will be much higher than that after inflation.
2. The annual savings calculations work similarly to the default safe withdrawal rate methodology. So if the chart says that the safe savings rate was 25%, then that means that the contribution in year 1 is 25% of your stated income. Each year after that, the initial contribution is adjusted up by the annual inflation rate regardless of your changing income over time.
3. The calculations assume that the full annual contribution is made at the beginning of the year on January 1st. That’s a bit of an over-simplification for most people saving a percentage of each paycheck, but the numbers should be in the same ballpark.