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Frequently Asked Questions
Why is savings rate so important for FIRE?
Your savings rate determines both how fast you accumulate wealth and how low your living expenses are. A higher savings rate means you save more AND need a smaller pot at retirement (because you live on less). These two effects compound powerfully — 50% savings rate means ~17 years to FIRE; 75% means ~7 years.
What is a good savings rate for FIRE in the UK?
For standard FIRE, 25–35% is a solid foundation. For early FIRE in your 40s, aim for 40–50%. For extreme early retirement (30s), 60–70%+ savings rates are common. Many UK FIRE followers maximise ISA (£20,000/year) and SIPP contributions first.
How is savings rate calculated?
Savings rate = (monthly savings ÷ take-home income) × 100. Use take-home (after-tax) income. If you earn £4,000/month after tax and save £1,600, your savings rate is 40%.
What return rate should I assume for FIRE planning in the UK?
A 5–7% nominal return (3–5% real after inflation) is commonly used for diversified global index fund portfolios. The default 7% nominal is reasonable for long-term projections, though returns vary year to year. Past performance does not guarantee future results.
How does the 4% rule relate to savings rate and years to FIRE?
The 4% rule (25× annual expenses) assumes your portfolio can sustain withdrawals indefinitely. The key insight is that years to FIRE depends almost entirely on your savings rate, not your income level. Whether you earn £30,000 or £100,000, a 50% savings rate leads to roughly the same time to financial independence.