The milestone works like this. Assume you make $80,000/year and are saving 15% per year. This equals $12,000/year you are socking away. Assume, also, that you have a nest egg of $160,000 built up, equal to 2X your salary. Then, if you earn 4.5% above the rate of inflation and assume that inflation is 3%, you are earning 7.5% for the year. On $160,000, a 7.5% return amounts to $12,000.
Thus, at this milestone of having a nest egg built up of twice your salary, you are adding the same amount to your nest egg through investment performance as you are from paycheck contributions.
As a point of reference, a well-diversified portfolio comprised of 65% stocks/35% bonds achieved an average annualized return of 8.3% over the 20 years ended 12/31/13.
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