Housing's Impact on Financial Independence
See the exact number of years renting vs. buying adds to (or subtracts from) your journey to FI.
Food, transport, insurance, and everything else that isn't rent or mortgage.
A common guideline is 4%. This is the percentage of your nest egg you'll withdraw each year in retirement.
Housing Costs
One or both scenarios do not seem to lead to FI with current assumptions.
By saving an extra $500 per month, you significantly accelerate your FI timeline.
67.8
N/A
How this works
Growth is projected using the real (inflation-adjusted) return — the nominal annual return you enter (default 7%), deflated by your inflation input (default 2.5%) — compounded monthly, and every dollar figure is shown in today's purchasing power rather than future inflated dollars.
Take-home income (gross income after your effective tax rate) minus housing cost minus other monthly expenses is what gets invested each month; the model then projects years to your FI number under two housing scenarios so you can see the years the housing choice costs or saves you.
Key assumptions
- Effective tax rate defaults to 22%, an all-in average rate applied to gross income before housing and other costs are subtracted.
- FI number = desired annual retirement income / safe withdrawal rate (default 4%, i.e. 25x spending).
- Housing scenario costs can be pulled from the Rent vs. Buy or Buy vs. Stay calculators' results, or entered manually.
What this leaves out
- Sequence-of-returns risk — growth is a constant rate, not a real market path.
- Fees — expense ratios and advisory fees are not deducted from the return.
- Taxes in retirement — withdrawals are treated as spendable in full; account type (traditional, Roth, taxable) is not modeled.
- Income growth — savings and contributions stay flat in real terms.
- Irregular spending — no college costs, home purchases, medical shocks, or windfalls.
Related calculators
A worked example: what $500 of extra rent costs in years
An $80,000 gross income at a 22% effective tax rate leaves $5,200 a month in take-home pay. Subtract $2,000 of non-housing expenses and the housing decision gets whatever is left. Starting from $25,000 invested, with a $60,000 spending goal at a 4% withdrawal rate, the FI number is $1,500,000 in today's dollars.
At a $3,000 monthly housing cost, $200 a month is left to invest, and the projection reaches $1,500,000 in 67.8 years. At $3,500 — the same household, $500 more housing — the monthly surplus is negative $300. Nothing is invested, the balance never grows toward the target, and the calculator reports FI as unreachable rather than inventing a date.
That is the whole argument for looking at housing this way. The two scenarios differ by 17% in monthly housing cost and by infinity in outcome, because what funds financial independence is not income but the residual after everything else is paid. When the residual is thin, a moderate cost difference is not a moderate outcome difference — it is the difference between slow and never.
Frequently asked questions
Why does one scenario say FI is unreachable instead of showing a number?
Because on those inputs it genuinely is. When take-home income minus housing minus other expenses is zero or negative, there is no monthly contribution, so the portfolio never grows toward the FI number and no crossover date exists. Showing a very large number instead would imply a reachable date that the arithmetic does not support. Lower a cost, raise income, or lower the spending goal that sets the target.
Why is 67.8 years so much worse than the Savings Rate calculator's answer?
Different questions, not different math. The Savings Rate calculator takes the amount you say you save as given. This one derives what you can save from income minus housing minus everything else — and at $3,000 of housing against $5,200 of take-home, that residual is $200 a month, not the $1,000 someone might assume. Both use the same engine conventions; this calculator just refuses to let the housing cost stay invisible.
Should I enter my mortgage payment or my full cost of ownership?
Full cost of ownership. Principal and interest, property tax, insurance, HOA, PMI if it applies, and a realistic maintenance figure. Entering only principal and interest is the single most common way this calculation flatters buying, because it silently drops the costs that do not build equity. If you have run the Rent vs. Buy or Buy vs. Stay calculator, you can pull the modeled monthly cost straight across.
Does paying down a mortgage count as saving?
Not in this model. It projects the investment portfolio that funds withdrawals at your safe withdrawal rate, and home equity does not pay grocery bills unless you sell or borrow against it. The principal portion of a mortgage payment is real wealth accumulation, but it is illiquid and it is not what the FI number is measured against. If you want the net-worth view instead, use Rent vs. Buy, which tracks equity explicitly.
Are these figures in today's dollars?
Yes. Growth runs on the real return — your nominal return deflated by your inflation input, compounded monthly — so the $1,500,000 target and every projected balance are in today's purchasing power. Enter your housing costs, expenses, and spending goal in today's dollars too, and let the model handle inflation rather than inflating the inputs yourself.
Sources
- Determining Withdrawal Rates Using Historical Data
William P. Bengen, 1994, Journal of Financial Planning — checked 2026-08-12
The paper that established the '4% rule' — the foundational research this site's safe withdrawal rate defaults trace back to.
- Retirement Savings: Choosing a Withdrawal Rate That Is Sustainable
Philip L. Cooley, Carl M. Hubbard, Daniel T. Walz, 1998, AAII Journal — checked 2026-08-12
The 'Trinity study,' which expands on Bengen across a range of withdrawal rates and portfolio mixes. Only Table 3 in the original paper is inflation-adjusted — the commonly-quoted near-100% success rates come from the nominal-withdrawal Tables 1-2.
- Safe Withdrawal Rate Series
Big ERN, Early Retirement Now — checked 2026-08-12
A practitioner blog, not peer-reviewed — the most detailed public research on SWR sensitivity to horizon length and asset mix.
- State of Retirement Income: 2025
Morningstar — checked 2026-08-12
Forward-looking base-case starting withdrawal rate, cited for context alongside the fixed 4% default this site uses. The ~3.9% figure is search-attested rather than directly confirmed against the source — treat it as a data point, not a recommendation, and worth checking whether a newer edition has superseded it.
*The calculations provided are for illustrative purposes only and should not be considered financial advice. Please consult with a qualified financial professional before making any decisions.