1. What is the Networthify Early Retirement Calculator?

The Networthify Early Retirement Calculator estimates how many years it will take to reach financial independence based on your savings rate, withdrawal rate, and expected return on investments. It's based on the "4% rule" and compound growth principles.

2. How Does the Calculator Work?

The calculator uses the Networthify formula:

Where:

• \( SR \) — Savings Rate (portion of income saved, decimal)
• \( WR \) — Withdrawal Rate (safe withdrawal rate, decimal)
• \( ROI \) — Return on Investment (expected annual return, decimal)

Explanation: The formula calculates how long your savings need to grow until they can sustain your withdrawals indefinitely, accounting for compound growth.

3. Importance of Retirement Planning

Details: Understanding your time to financial independence helps with setting realistic goals, adjusting savings rates, and making informed investment decisions.

4. Using the Calculator

Tips: Enter savings rate as a decimal (e.g., 0.50 for 50%), withdrawal rate (typically 0.03-0.04), and expected annual return on investments (after inflation). All values must be positive.

5. Frequently Asked Questions (FAQ)

Q1: What is a good savings rate?
A: Typically 15-20% is recommended for traditional retirement, but early retirement often requires 50% or more.

Q2: Why is 4% a common withdrawal rate?
A: The "4% rule" comes from the Trinity Study showing this rate had high success over 30-year periods with traditional portfolios.

Q3: Should ROI be before or after inflation?
A: For most accurate results, use real (after-inflation) returns, typically 4-7% for stock investments.

Q4: Does this account for taxes?
A: No, you should adjust your savings rate to account for taxes on income and investments.

Q5: What are the main limitations?
A: Assumes constant returns (no sequence of returns risk), consistent savings rate, and doesn't account for changing expenses in retirement.