Most financial advice tells you to "save 20%" and call it a day. But 20% of what? Before tax or after? Does your employer's superannuation contribution count? And is 20% actually enough — or will you be working until 67 regardless? Your savings rate is the single most powerful number in your financial life, and most Australians have never actually calculated it.
Try it: Use our Savings Goal Calculator to work out exactly how long it will take to hit your target based on your current savings rate.
What Is a Savings Rate?
Your savings rate is the percentage of your income that you save rather than spend. The formula is straightforward:
Savings Rate = (Amount Saved ÷ Gross Income) × 100For example, if you earn $90,000 per year and save $18,000 of it, your savings rate is 20%. Simple enough — but the devil is in the details. What counts as "income" (gross or net)? What counts as "saving" (does paying down a mortgage count)?
The most common approach is to use your take-home (after-tax) income as the denominator, and count all forms of saving as the numerator — including extra mortgage repayments, voluntary super contributions, and cash savings. This gives you a realistic picture of how aggressively you're building wealth from the money you actually see.
Does Your Compulsory Super Count?
In Australia, your employer contributes 11.5% of your ordinary time earnings directly into your superannuation fund (rising to 12% from July 2025). The question is: does this count toward your savings rate?
Technically, yes — it is saving. But most FIRE (Financial Independence, Retire Early) practitioners calculate two separate rates: one including super, and one excluding it. The reason is that compulsory super is locked away until you reach preservation age (currently 60), so it doesn't help you achieve early financial independence. If retiring at 45 is your goal, your accessible savings rate is the one that matters.
Example: Sarah earns $110,000/year. Her employer pays $12,650 in compulsory super (11.5%). She also saves $1,500/month ($18,000/year) from her take-home pay. Her total savings rate including super is roughly 28%, but her accessible savings rate — the portion she can actually use before 60 — is closer to 16%.
Savings Rate Benchmarks
Here is what the different savings rate camps look like:
| Savings Rate | Approach | Years to Retirement (from zero) |
|---|---|---|
| 5% | Spending nearly everything | 66 years |
| 10% | Below recommended | 51 years |
| 15% | Standard advice (MoneySmart) | 43 years |
| 20% | Above average | 37 years |
| 30% | Solid wealth building | 28 years |
| 40% | Serious FIRE territory | 22 years |
| 50% | Aggressive FIRE | 17 years |
| 65% | Extreme FIRE | 10–11 years |
These figures assume a 7% average annual investment return and a 4% safe withdrawal rate — the classic "Trinity Study" numbers. Australian-specific returns may vary slightly, but the ratios hold.
The 10% vs 25% Savings Rate: A 30-Year Comparison
Let's look at two Australians, both earning $85,000 take-home per year, starting from zero with no existing savings:
Alex saves 10% ($8,500/year). After 30 years at 7% annual return, Alex's portfolio is worth approximately $855,000.
Jordan saves 25% ($21,250/year). After 30 years at the same 7% return, Jordan's portfolio reaches approximately $2,138,000 — more than twice as much.
But here's the kicker: Jordan also reaches financial independence after just 28 years (not 30), because they have lower lifestyle costs to fund in retirement.
The compounding effect works in two directions simultaneously — a higher savings rate builds wealth faster and reduces the amount you need to accumulate to be financially independent, because your lifestyle costs less.
Income Matters Less Than You Think
A household earning $60,000 with a 30% savings rate will reach financial independence significantly faster than a household earning $200,000 with a 5% savings rate. The $200k earner has a much higher lifestyle to fund in retirement, which means they need a much larger portfolio — but they're barely building one.
This is the core insight of the FIRE movement: the gap between what you earn and what you spend is more important than your absolute income. Frugality and intentional spending are genuinely more powerful than earning more, at least up to a point.
What Is the FIRE Movement?
FIRE stands for Financial Independence, Retire Early. It originated in the US but has a significant following in Australia. The goal is to accumulate 25 times your annual expenses in invested assets (based on the 4% rule), then live off investment returns indefinitely without needing to work.
Australian FIRE practitioners often aim for savings rates of 40–70%, combined with low-cost index fund investing through platforms like Vanguard or Betashares. The super preservation age complicates the strategy for people aiming to retire before 60, requiring a "bridge" portfolio of accessible investments to fund the gap years.
Practical Tips to Increase Your Savings Rate
- Automate it first. Set up an automatic transfer to a separate high-interest savings account the day after your pay hits. What you don't see, you don't spend.
- Attack your biggest expenses. Housing, transport, and food typically account for 70% of spending. A 10% reduction in those categories outweighs eliminating every coffee and subscription you own.
- Avoid lifestyle inflation. Every pay rise is an opportunity to increase your savings rate. If you keep your lifestyle constant and direct raises to saving, your savings rate compounds alongside your salary.
- Count your super. At minimum, make sure you're not leaving employer contributions on the table. Check your super is actually being paid (ATO unpaid super is rampant in Australia).
- Track for 90 days. Most people overestimate their savings rate by 5–10 percentage points because they forget irregular expenses — car registration, insurance renewals, and Christmas spending.
How to Calculate Your Actual Savings Rate Right Now
Add up everything you saved last month: money moved to savings accounts, extra mortgage repayments above the minimum, voluntary super contributions, and investments. Divide that total by your take-home pay for the month. Multiply by 100.
Most Australians are surprised by the result — sometimes pleasantly, more often not. But knowing your number is the essential first step.
Frequently Asked Questions
Does paying extra off my mortgage count as saving?
Yes. Extra mortgage repayments directly increase your net worth (home equity) and are equivalent to earning the mortgage interest rate risk-free. Many financial planners count these as part of the savings rate calculation.
Should I include compulsory superannuation in my savings rate?
It depends on your goal. If you're planning a traditional retirement at 60+, include it. If you're pursuing early retirement, track it separately since you can't access it before preservation age without meeting a condition of release.
Is a 20% savings rate enough to retire comfortably?
A 20% savings rate from age 25 should produce a comfortable retirement by 62–65, especially combined with compulsory super. However, if you start later or want to retire earlier, you need a higher rate. Use our savings goal calculator to model your specific situation.
What is a realistic savings rate for most Australians?
The average Australian household saves roughly 3–6% of disposable income, based on ABS Household Saving Ratio data. Most financial advisers recommend a minimum of 15–20% including super. Anything above 25% puts you ahead of the vast majority of Australian savers.