Savings rate: the same percentage works twice
Say someone earns €4,000 net a month and invests €1,600 of it: the savings rate is 40%. The remaining €2,400 is the cost of living. Once work stops, the portfolio has to pay that out every month, which comes to €28,800 a year.
The calculation uses a withdrawal rate of 4% a year, minus 0.25% in fees, so 3.75%. The target capital is €28,800 divided by 3.75%, which gives €768,000 in today's euros, or 26.7 years of spending. The 4% comes from the February 1998 AAII Journal article on choosing a sustainable withdrawal rate. On data from 1926 to 1995, it found that annual withdrawals of 3% or 4% were very unlikely to exhaust a portfolio of stocks and bonds. That finding is about the past.
At 50%, the deposit goes from €1,600 to €2,000 and the target capital drops from €768,000 to €640,000. The portfolio fills faster, and the tank it has to fill is smaller.
Salary drops out of the calculation. At 40%, the target capital equals 480 months of deposits whether you earn €4,000 or €6,000 net, because everything scales in the same proportion. So the timeline is the same, to the month.
| Net salary | Savings rate | Saved per month | Target capital | Target capital in months of deposits | Time to independence |
|---|---|---|---|---|---|
| €4,000 | 20% | €800 | €1,024,000 | 1,280 | 43 years 10 months |
| €6,000 | 20% | €1,200 | €1,536,000 | 1,280 | 43 years 10 months |
| €4,000 | 50% | €2,000 | €640,000 | 320 | 18 years 9 months |
| €6,000 | 50% | €3,000 | €960,000 | 320 | 18 years 9 months |
This holds as long as you start from €0 and withdrawals are not taxed.
The savings rate acts twice: it fills the portfolio faster, and it shrinks the sum that portfolio will have to replace.
How to calculate your savings rate: seven timelines, from 10% to 70%
The timelines below come from the financial independence calculator, and this link opens the 40% row. Every row uses the same assumptions: €4,000 net a month, a €0 start, a 6% annual return, 2% inflation, 0.25% in annual fees, a 4% withdrawal rate (3.75% after fees) and no tax on withdrawals, as for a Luxembourg resident. Deposits and spending rise with inflation.
| Savings rate | Saved per month | Spending to cover | Target capital (today's euros) | Time to independence |
|---|---|---|---|---|
| 10% | €400 | €3,600 | €1,152,000 | 62 years 11 months |
| 20% | €800 | €3,200 | €1,024,000 | 43 years 10 months |
| 30% | €1,200 | €2,800 | €896,000 | 32 years 8 months |
| 40% | €1,600 | €2,400 | €768,000 | 24 years 10 months |
| 50% | €2,000 | €2,000 | €640,000 | 18 years 9 months |
| 60% | €2,400 | €1,600 | €512,000 | 13 years 9 months |
| 70% | €2,800 | €1,200 | €384,000 | 9 years 7 months |
The 6% is an assumption made for the calculation, for teaching purposes, and it describes no investment. The 2% is the ECB's medium-term inflation target, set out in its monetary policy strategy, linked here in its French version.
The engine moves forward month by month, in current euros. The portfolio grows at the return minus fees, the deposit and the target capital follow inflation, and the date shown is the first month in which the portfolio exceeds the target capital.
Going from 10% to 20% takes 19 years and 1 month off the timeline. Going from 60% to 70% takes off 4 years and 2 months.
In this table, each extra ten points of savings removes between 24% and 30% of the years that were left.
Savings rate and financial independence: cross-border workers and expats
A salary from one country, prices from another
A cross-border worker who lives in Lorraine, Wallonia or Saarland earns on one side of the border and spends on the other. An expat settled in Luxembourg does both on the same side. Either way, the calculation only sees the gap between the two, which is the rate. The spending to cover is priced in the country where you will live once you are free, and that may be a different one.
Tax on withdrawals
The previous table assumes untaxed withdrawals, which is the Luxembourg preset. According to the guichet.lu page on buying and selling shares, in French, an individual who holds less than 10% of a company's capital pays nothing on the gain from shares kept for more than six months.
Elsewhere, a tax sits between the withdrawal and the spending, and the target capital grows by the same amount. The model counts every euro withdrawn as a taxable gain. That is a cautious reading, since part of each withdrawal is really your own capital coming back.
The table takes the 40% row for one adult, with the same formula and a preset for each country of residence.
| Preset (country of residence) | Tax on withdrawals | Gross withdrawal per month for €2,400 net | Target capital | Time to independence |
|---|---|---|---|---|
| Luxembourg | 0% on securities held over 6 months | €2,400 | €768,000 | 24 years 10 months |
| Belgium | 10% above €10,000 a year | €2,574 | €823,704 | 26 years |
| Germany | 26.375% above €1,000 a year | €3,230 | €1,033,571 | 30 years |
| France | 31.4% from the first euro | €3,499 | €1,119,534 | 31 years 5 months |
The rates come from the official texts, read on 11 September 2026. In Belgium, the SPF Finances page on the capital gains tax, in French, sets a 10% tax on gains from financial assets sold from 1 January 2026, with the first €10,000 exempt each year (tax year 2027). In France, a news item published by Entreprendre.Service-Public on 10 February 2026, also in French, states that the flat tax (PFU) stands at 31.4% from 1 January 2026: 12.8% income tax and 18.6% social contributions.
In Germany, the tax is 25% under § 32d EStG. The 5.5% solidarity surcharge in § 4 SolZG comes on top, which gives 26.375% before church tax. § 20 EStG sets the saver's allowance at €1,000 per person and €2,000 for a couple assessed jointly. All three texts are in German.
A tax allowance is a fixed amount. It covers a large share of the withdrawals behind a modest cost of living and a small share of a large one. So with the Belgian preset, the timeline stretches slightly as salary rises, at the same savings rate: at 40%, it is 26 years on €4,000 net and 26 years and 2 months on €6,000. The German allowance is ten times smaller and does not move the date by a single month. The model multiplies the allowance by the number of adults in the household.
For a cross-border worker, the tax treaty between Luxembourg and the country of residence decides which state taxes these gains.
At a 40% savings rate, the same plan takes 24 years and 10 months with no tax on withdrawals, and 31 years and 5 months with the French flat tax.
What the savings rate does not tell you
The table assumes the same rate for decades. A pay rise, a child or a switch to part-time work moves it, and the timeline moves too.
The 6% return is applied every month, with no bumps. In real markets, a fall just before or just after the independence date does more damage than a fall early in the plan.
The 2% inflation is a target. The ECB statistics page showed 3.3% year on year for the euro area in August 2026. For the same nominal return, higher inflation lengthens the timeline.
Pensions are left out, even though an employee paid in Luxembourg pays into the pension insurance scheme. For someone who stops working before pension age, the timeline shown is therefore on the cautious side.
Only money that is invested counts. Capital repaid on a mortgage stays outside the rate, and a loan's monthly payment stays in spending even after the loan is paid off.
The table's timeline holds for a savings rate that stays put for decades, and no real life does that.
Frequently asked questions
How do you calculate your savings rate?
You calculate your savings rate by dividing the amount invested each month by the net income for the same month: €1,600 invested out of €4,000 net makes 40%. Net income means income after tax and social contributions. Money left in a current account and capital repaid on a loan are not counted.
How much to save to be free?
In this model, the answer is a share of income rather than an amount. With the table's assumptions, including an assumed 6% return, a 30% savings rate gets there in 32 years and 8 months, 50% in 18 years and 9 months, and 70% in 9 years and 7 months. The target capital comes to about 26.7 years of spending, since it is annual spending divided by 3.75%.
Why doesn't a higher salary shorten the timeline?
At the same savings rate, a higher salary raises deposits and spending in the same proportion, and the target capital with them: 480 months of deposits at 40%, 1,280 months at 20%. It only shortens the timeline if it pushes the rate up, which happens when spending grows more slowly than the salary.
Does starting capital change the calculation?
Yes. The table starts from €0, and any capital already invested shortens the timeline. Spending then matters again: the same starting capital covers a larger share of a small target, so it shortens the timeline more for a modest cost of living.
Key points
- The savings rate is the share of net income invested each month, and what is left is the income that has to be replaced once you are free.
- A higher rate acts twice: it raises the deposit and it lowers the target capital, which equals annual spending divided by the withdrawal rate net of fees.
- Starting from €0 with no tax on withdrawals, the timeline depends only on the rate: with an assumed 6% return, 20% gives 43 years and 10 months and 50% gives 18 years and 9 months, on €4,000 or €6,000 net alike.
- A tax on withdrawals lengthens the timeline at the same rate: at 40%, the calculation goes from 24 years and 10 months with no tax to 31 years and 5 months with the French flat tax (PFU) of 31.4%.
- The calculation assumes a savings rate and a return that never change, leaves pensions out, and is an estimate for teaching purposes.