So let's start at the very beginning, Brian. If you're someone who makes fifty thousand dollars a year, that's your starting income. At the beginning of your 25-year window, we want to show you, at different savings rates, how much of your pre-retirement income you would be able to replace at a sustainable three percent safe withdrawal rate over the entirety of your retirement. This is assuming, once again, that you're getting a five percent annual pay raise.
Guys, this is the part that was a little sad to me. Even with a great pay rate increase every year, starting at fifty thousand dollars a year, not a single one of these income replacement calculations got anywhere close to 60, and that was disappointing. We'd like 60 because it's a loose time frame to think about, being debt-free, not having to save anymore, and being able to control your tax situation. It seems realistic to us that if you can replace sixty percent of your pre-retirement income, you can probably maintain the same standard of living that you had pre-retirement.
Well, under this scenario, if you were going to try to be FIRE (Financially Independent, Retire Early) at fifty thousand dollars, you have to operate under the assumption that when I retire and go into Financial Independence, I'm actually likely going to have a standard of living probably either at or slightly below what it was during my working years. Yeah, and I want to give these numbers because some of you, I know a lot of you are listening to podcasts and you're saying, "I don't have access to slides." Go check, by the way, when you get a chance, obviously, go check us out at moneyguy.com. You can watch the YouTube videos and everything else to actually see these slides.
But here's what's interesting: if you're saving 25, you're only going to be able to replace 25 percent of your pre-retirement income. Thirty percent, thirty; you can see the correlation here. Thirty-five is 35; saving 40 percent gets you to 40 percent. If you're going to do this, you're going to have to be tremendously disciplined going forward because every dollar counts. I just want you to think about this: our life costs money naturally. So if you're goal-oriented—and I think if you're at $50,000—I think you've got to shoot for that 40 number at least to be saving well.
If you're saving 40 percent of your gross income and you're paying taxes, I mean, you are living online. I mean, you're budgeting to the penny, week to week, month to month, year to year, with not a lot of wiggle room. So it's going to require an extreme level of discipline not just through your working years but for your entire adult life because you have to maintain that same level of discipline even when you get into Financial Independence. It's a hard road to tow.
I also think if you're going to do this with a lower income, you're going to have to realize you'll just transition to a different, probably lower-paying job. It doesn't have to be a career like you had, but this is where the Barista FIRE movement kicks in, where you might have to go get a part-time job, working at a coffee shop or in retail or doing one of the new gig economy jobs, like working for Uber. This is what you're going to need to pay attention to if you're still going to make this dream work even with a lower income.
And then the last thing is the 25. We talk all the time about 25 being your goal savings rate. Well, if you're someone who has an average income, you're not considered a higher-income earner at $50,000. A savings rate of 25 percent probably won't get it done for you. Again, if you save 25 percent for 25 years, you're only going to be able to replace 25 percent of your pre-retirement income. So either you need to work longer, be retired for a shorter amount of time, or you have to increase your savings rate. And that's just going to be a really, really difficult thing to do at that income level. Yeah, not to be the bearer of bad news, but if you're doing the FIRE movement with a low income, I think you're going to have to consider an alternative approach. Meaning, you're either going to be working throughout what you consider Financial Independence through that side hustle. But it's not going to be what they call fat FIRE or living the dream life because it's just hard. I mean, that's something I think you're going to consistently find is that if you're going to be in this FIRE movement, you better have a high income and a tremendously high savings rate. So discipline is rewarded because it's not easy, especially for low-income people. For more information, check out our full show called, "How to Achieve FIRE By Income (Are You on Track?)."