◈ GLOSSARY · PERSONAL FINANCE
Savings Rate.
A definition, in plain English — with the books that teach it.
ClearValue Books · reviewed against sources ·
◈ DEFINITION
What it means
Definition
The percentage of take-home income that goes to savings and investments instead of spending. It's the single biggest lever on how soon you can stop working — a 50% savings rate gets to financial independence in roughly 17 years, a 10% rate takes about 50. Use after-tax income as the denominator to keep the number honest.
◈ IN PRACTICE
Example
Take-home pay of $7,000/month with $2,100 going to a 401(k), Roth IRA, and brokerage is a 30% savings rate, even if the lifestyle still feels tight.
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