How Much You Need to Invest to Replace Your Salary

Most Australians dream of reaching a point where they no longer rely on a job to fund their lifestyle — where their investments cover their living expenses, month after month. But how much money do you actually need to make that happen?

Replacing your salary with investment income is the foundation of financial independence. It’s not about sudden wealth or risky bets, but rather a long-term strategy rooted in math, discipline, and the power of compounding. In this article, we’ll break down exactly how much you’d need to invest to replicate the average Australian salary, how to use the “5% rule” to calculate your financial independence number, and how starting earlier can cut your savings requirement dramatically.

Whether you’re 20, 30, or even 50, this guide shows it’s still possible — if you start intentionally today.

What Does It Mean to Replace Your Salary with Investment Income?

Replacing your salary doesn’t mean quitting your job tomorrow. It means building a portfolio that works for you — generating consistent, inflation-adjusted income that covers your living expenses, even if you stop working entirely.

In Australia, the average full-time salary is around $92,029 (as of May 2022, according to the Australian Bureau of Statistics). To live off investments and fully replace that salary, your portfolio needs to produce at least that amount annually.

But investment income isn’t magic — it’s built on strategic principles. Here’s where the 5% rule comes in.

The 5% rule is a simple benchmark used by financial independence planners: to safely withdraw 5% of your portfolio each year without depleting the original capital. That means if you need $92,029 per year to live, you’ll need a portfolio of:

$92,029 ÷ 0.05 = $1,840,592

This figure may sound intimidating, but it’s not arbitrary. It reflects decades of historical market data. Here’s how:

• The Australian share market has delivered an average annual return of ~9.8% over the past 30 years.
• When you subtract 2.3% for taxes and fees, and 2.5% for inflation, you’re left with a real return of 5%.
• This 5% is what you can safely spend each year — without touching your base capital.

The beauty of this model is that the income adjusts with inflation. So, year after year, you receive the same real purchasing power, not just a flat dollar amount.

It’s important to note this is a general estimate — market conditions, personal tax rates, and lifestyle choices can change the actual outcome. But it gives a clear, data-backed starting point.

In the next section, we’ll show how this target becomes achievable through consistent investing — and how your starting age massively influences the amount you need to save.

The 5% Rule: How It Works in Real Numbers

The 5% rule is a cornerstone of the FIRE movement (Financial Independence, Retire Early) and long-term retirement planning. But to truly understand its power, you need to see how it plays out in real numbers.

Let’s assume you want to replace the average Australian salary of $92,029 annually. Using the 5% rule, you’d divide that number by 0.05 (5%):

$92,029 ÷ 0.05 = $1,840,592

That means you’ll need a portfolio worth $1.84 million to safely withdraw $92k annually without touching the principal — forever.

Now, some people ask: Why 5%? Isn’t that too optimistic or too conservative?

Here’s the rationale:

• Average long-term return of the Australian share market: ~9.8% per year
• Estimated annual drag from taxes and fees: ~2.3%
• Expected long-term inflation: ~2.5%
• Net usable return (“real return”): ~5%

This “real return” means that your portfolio grows fast enough to maintain purchasing power — even as living costs rise. If you live off only this 5%, your capital stays intact and continues working for you.

Tip for Beginners: Not sure how to invest for long-term returns? Consider a low-fee index fund or diversified ETF portfolio. You can start with platforms like Pearler, Stake, or SelfWealth in Australia.

How Much You Need to Invest Daily Based on Your Age

Time is your most powerful asset when investing. The earlier you start, the less you need to contribute daily. Why? Compound interest rewards the patient.

Here’s a simple breakdown of how much you’d need to invest daily to reach the $1.84 million goal by age 60 — assuming you start with zero, earn average market returns (9.8%), and reinvest dividends.

Starting Age	Daily Investment Needed	Total Years to Invest	Monthly Equivalent
20	$10.10	40 years	~$306
30	$27.72	30 years	~$831
40	$81.11	20 years	~$2,433
50	$296.38	10 years	~$9,000+

Calculated using compound interest formula assuming 9.8% annual return, with all earnings reinvested.

As you can see, the cost of waiting is steep. Starting at 50 requires almost 30x more investment than starting at 20.

What This Tells Us ?

• If you’re young, you have leverage through time
• If you’re older, you’ll need to combine investing with spending discipline, side income, or delayed retirement
• But it’s never “too late” — it just requires different strategies

Tools to Calculate Your FI Number

Understanding the 5% rule and your investment target is only the beginning. To make real progress, you need to turn theory into planning. Fortunately, there are powerful (and often free) tools that help Australians estimate, track, and adjust their path to financial independence.

Here are some of the best options:

1. FIRE Number Calculator by MoneySmart

Australia’s government-backed MoneySmart website provides a solid foundation for personal finance. Their investment calculator isn’t tailored specifically to FIRE, but it lets you model returns, deposits, and timelines realistically.

Best for: Simple, conservative projections
Try it here: moneysmart.gov.au (no affiliation)

2. FI/RECalc – Community-Based FIRE Tool

This browser-based tool lets you plug in:

• Your annual expenses (e.g., $92,000)
• Your current savings
• Return assumptions (e.g., 9.8%)
• Inflation rate

You get a clear timeline and portfolio growth graph.

Best for: Enthusiasts who want flexibility
Try it here: firecalc.app

3. Pearler Autoinvest Platform (Australia-Based)

Pearler isn’t just a brokerage — it’s designed with FIRE goals in mind. Their autoinvest feature lets you set up automatic investments into diversified ETFs like VAS or A200. You can even track how close you are to your FI goal.

Best for: Hands-off, long-term investing
Bonus: Free brokerage for some ETFs

CTA: Open a Pearler Account and Set Your FIRE Goal Today
(Insert affiliate link or AdSense slot here)

4. Apps for Budgeting and Saving Toward FI

Budgeting is half the battle. These tools complement your investing strategy by helping you control cash flow and save more to invest:

App	Key Feature	Monetization
YNAB	Goal-based budgeting, sync with bank	Affiliate/Ad
PocketSmith	Forecasts future net worth	Affiliate
Goodbudget	Envelope-style budgeting	Organic

Tip: Look for budgeting apps with automatic savings or round-up features. Small, consistent actions build momentum.

Smart Monetization Tips:

• Place AdSense Auto Ads between tool #2 and #3
• Insert affiliate links (Pearler, YNAB, etc.) only where truly relevant
• Consider building your own tool on kabarbursa.com (simple FIRE calculator)

Pro Tip: Use these tools not just to estimate your FIRE number — but to set real milestones. Seeing your projected date for financial independence can be incredibly motivating.

Final Thoughts: Start Small, Build Big

If you’ve made it this far, you already understand what most people never take the time to figure out:

• How much you really need to replace your salary through investments
• Why the 5% rule is a practical, time-tested benchmark
• How early action significantly lowers your required savings
• Which tools can help you track and automate your journey
• What mental traps to avoid on the way to financial freedom

The gap between knowing and doing is where most financial dreams fade.

But here’s the good news: you don’t need to be perfect — you just need to start.

Revisit the Numbers:

• Want to replace the average Australian salary of $92,029/year?
• You’ll need an investment portfolio of roughly $1.84 million
• Starting at 20? You only need to invest $10/day
• Starting at 30? It’s $27/day
• Starting at 40? $81/day
• And if you’re 50? $296/day

Time is your most valuable asset — more than income, more than intelligence.

So, What Should You Do Today?

• Set your FIRE number using one of the tools we mentioned
• Open an account with a low-fee investment platform
• Automate small, regular contributions (weekly or monthly)
• Track your progress, and don’t panic during market dips
• Commit to consistency, not perfection

Whether you start with $10 or $1,000, the important part is starting.

Ready to begin?
Open a long-term investing account today with Pearler, Raiz, or your broker of choice — and get one step closer to living off your investments.

Don’t let your money sit idle. Let it buy your freedom.