Assume the person starts working at 25 and earns the average salary for whatever year it is at the time (changing every year). Assume that they save 20% of every pay cheque and invest it in an account that earns 7% interest tax-free which gets reinvested. How many years does it take them to save 25 times their current annual salary? How much money have they saved?

  • 2
    Is this homework?
    – Vicky
    Commented Sep 29, 2019 at 16:42
  • According to this if you save 20% of your income you can expect it to take 37 years. Commented Sep 29, 2019 at 21:08
  • @RobertLongson - What rate of return does MMM assume? That infographic is out of context, where's the full article? Commented Sep 30, 2019 at 2:58
  • @JoeTaxpayer here you go if you want to read it all. Commented Sep 30, 2019 at 3:00
  • Thanks, 5% net after inflation. Reasonable. I've met the author, nice guy. Started as extreme frugal, but now makes so much blogging, people question how frugal he remains. Either way, he practiced what he preached. Commented Sep 30, 2019 at 3:04

1 Answer 1


Years ago I wrote a brief discussion of a book titled The Number. In it, I link to a spreadsheet that will do exactly as you request. It opens looking like this

enter image description here

I used a starting salary of 17338 as that's what was needed to get an age 62 salary of 60,000. The assumed raise was 3%. The 15% saved was (in my approach) 10% deposit and 5% company match. You can adjust that up to 20%, and adjust the return down to 7%. You can adjust the salary increase, maybe more at the beginning, less later on.

Keep in mind a few issues -

  • You won't be saving in retirement for retirement, therefore, 20% of your budget just got eliminated.
  • Ditto for 7.65% Social Security withholding.
  • Ditto for mortgage (perhaps) and college savings.
  • Social Security replaces some of your budget income. 40-50% for most people.

Personal Finance is just that, personal. Look at your own timing, budget, etc, along with forecast Social Security benefit, and see what "Number" you need to make up the difference.

  • #1 The Question states "current salary". No raises. #2 The answer to the question is the the Future Value function =-FV(7%/12, 12*32.6, 20%/12, 0) which results in 32.6 years.
    – RonJohn
    Commented Sep 30, 2019 at 2:52
  • @RonJohn "earns the average salary for whatever year it is at the time (changing every year)" What? He wrote literally "changing every year" which is what my spreadsheet does. If that's wrong, the sheet let's you put 0% growth. Commented Sep 30, 2019 at 2:53
  • Right. The answer is always the same: it takes 32.6 years at 7% yearly compound interest (I used monthly compounding) for for whatever year it is at the time to grow 25x. Using your examples: how long does it take for 17,338 to grow to $433,450? 32.6 years. How long does it take for 17,858 to grow to 446,450? 32.6 years.
    – RonJohn
    Commented Sep 30, 2019 at 3:00
  • Or... does "and earns the average salary for whatever year it is at the time" mean that he wants us to research the median US income for every year from 1958 to 2005 and do all that math (which is just a bunch of exponent statements)? If so, then he can do the grunt work research. It's high school math.
    – RonJohn
    Commented Sep 30, 2019 at 3:04
  • 1
    @Dugan - it may not be possible. Consider. Even if I gave you the median income for each year, it reflects people coming into, and leaving the workforce. It's not as if a median wage worker at 22 will stay median over their lifetime. The data is not granular enough to get 22 yr old wage, 23 year old wage, etc. In my opinion, my sheet lets you start at whatever number, inflate the wage and money separately, etc. More than this is a tough effort, not sure it's doable. Commented Oct 2, 2019 at 19:36

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