Let's say you make $100,000 per year. Saving 80% would mean saving $80,000 per year, and living on $20,000 per year. After 5 years you would have saved $400,000. 3% of $400,000 is $12,000, which is only about half of what you need to equal what you'd lived on for the past 5 years. You'd need a 5% return in order to make $20,000 per year from $400,000.
And this doesn't even take taxes in to account. Good luck saving 80% of your net when taxes alone eat away more than 20% of your net. You're also going to wind up paying taxes on the 5% return, effectively requiring maybe a 6% return (or probably significantly more, considering how much you lost in income taxes in the first place).
The amount people pay in taxes do vary, which is why this "approximately 80%" savings for "approximately 5 years" system is probably only going to work for people who don't pay much if anything in taxes (ie. people with a pretty low income).
Depending on your income, your tax rate, any unforeseen expenses, and your desired standard of living, you might need to work considerably longer.
Let's say you make $100,000 per year. Saving 80% would mean saving $80,000 per year, and living on $20,000 per year. After 5 years you would have saved $400,000. 3% of $400,000 is $12,000, which is only about half of what you need to equal what you'd lived on for the past 5 years. You'd need a 5% return in order to make $20,000 per year from $400,000.
And this doesn't even take taxes in to account. Good luck saving 80% of your net when taxes alone eat away more than 20% of your net. You're also going to wind up paying taxes on the 5% return, effectively requiring maybe a 6% return (or probably significantly more, considering how much you lost in income taxes in the first place).