Our Methodology

Core Calculator Formulas

FIRE Number Calculation

Your FIRE (Financial Independence, Retire Early) number is calculated using the formula:

With a 4% withdrawal rate, this equals 25× your annual expenses. This is based on the Trinity Study (1998), which found that a 4% initial withdrawal rate, adjusted for inflation, survived 95% of historical 30-year periods.

Coast FIRE Calculation

Coast FIRE determines how much you need invested today so compound growth alone reaches your retirement goal:

Where r is the expected annual return (default: 7% real return) and n is years until traditional retirement. We use monthly compounding for precision: (1 + r/12)^(12×n).

Compound Interest

All growth projections use the standard compound interest formula with monthly compounding:

Where P is principal, r is annual rate, t is years, and PMT is monthly contribution.

Monte Carlo Simulation

Our Monte Carlo simulator runs 1,000 randomized scenarios to account for sequence of returns risk. Each simulation:

• Randomly samples annual returns from a normal distribution (mean: 7%, std dev: 15%)
• Applies returns in different sequences to test portfolio survival
• Accounts for annual withdrawals adjusted for 3% inflation
• Reports success rates across all scenarios

This methodology reflects the research of William Bengen and subsequent studies on sustainable withdrawal rates.

72(t) SEPP Calculation

Substantially Equal Periodic Payments (SEPP) calculations use three IRS-approved methods:

• Required Minimum Distribution: Account Balance / Life Expectancy Factor
• Fixed Amortization: Uses IRS mortality tables and a reasonable interest rate
• Fixed Annuitization: Uses annuity factors from IRS mortality tables

We use the IRS Single Life Expectancy Table from Publication 590-B and the 120% mid-term Applicable Federal Rate (AFR) as the reasonable interest rate.

Data Sources

We rely exclusively on government, academic, and peer-reviewed sources:

Default Assumptions

Our calculators use these defaults, which you can adjust:

Limitations & Disclaimers

What Our Calculators Cannot Account For:

• Future market conditions: Past performance doesn't guarantee future results
• Individual tax situations: We provide pre-tax estimates; consult a tax professional
• Healthcare costs: These vary significantly by individual circumstance
• Social Security timing: Optimal claiming strategies require personalized analysis
• Estate planning: Inheritance, trusts, and beneficiary considerations
• Geographic cost-of-living changes: Moving in retirement affects expenses
• Black swan events: Major economic disruptions, pandemics, geopolitical events

Recommended Use:

• Use these tools for directional guidance, not precise predictions
• Run multiple scenarios with conservative and optimistic assumptions
• Revisit calculations annually as your situation changes
• Consult qualified professionals (CFP, CPA, attorney) for personalized advice

Update Schedule

We maintain accuracy through regular reviews:

• Quarterly: Review AFR rates, tax bracket changes, contribution limits
• Annually: Update default assumptions based on economic data
• As needed: Incorporate new research on withdrawal rates and retirement planning
• Immediately: Fix any reported calculation errors

Research Foundation

Our methodology is grounded in peer-reviewed financial research:

• Bengen, William P. (1994). "Determining Withdrawal Rates Using Historical Data." Journal of Financial Planning. Original 4% rule research.
• Cooley, Hubbard, & Walz (1998). "Retirement Savings: Choosing a Withdrawal Rate That Is Sustainable." AAII Journal. The Trinity Study.
• Pfau, Wade D. (2018). How Much Can I Spend in Retirement?Updated withdrawal rate research.
• Kitces, Michael. Ongoing research on dynamic withdrawal strategies and sequence of returns risk.
• Early Retirement Now (Big ERN). "Safe Withdrawal Rate Series" - 50+ part analysis of withdrawal strategies.