The 7% is referring to the rate of return on your investments. He is making the assumption that if you invest $100 in the stock market on January 1, then on Dec 31 your account will have $107 in it. This assumption is an average over many years.
There is a common rule of thumb in the investing world that you can safely remove 4% a year from your investments and they will continue to grow. (7% return minus 4% withdrawals means you have 3% more in the account each year)
It doesn't matter what your lifestyle is. If you are a junior developer who makes 80k a year and spends 50k a year, then you should save 25x50k=1.25mil and then you no longer have to work for a living. This process will take years or decades.
