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) and related historical withdrawal-rate research. Outcomes vary by period, allocation, fees, taxes, and horizon, so 4% is a reference rule—not a promise.

Coast FIRE Calculation

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

Where r is an effective annual return (default: 5% real, after inflation) and n is years until the selected target age. Principal-only Coast growth uses annual effective compounding. Projections with monthly contributions use the equivalent monthly rate (1 + r)^(1/12) - 1, so both methods stay on the same annual-return basis.

Compound Interest

Projections with monthly contributions use the standard annuity formula:

Where P is principal, i is the monthly rate, t is years, and PMT is the end-of-month contribution. FIRE projections treat the entered annual real return as an effective rate and use i = (1 + r)^(1/12) - 1. Tools that explicitly accept a nominal annual rate with monthly compounding use i = r/12.

Monte Carlo Simulation

The free simulator runs 1,000 randomized paths. Each path:

• Randomly samples annual stock returns (mean 10.5%, std dev 18%), bond returns (mean 5%, std dev 6%), and inflation (mean 3%, std dev 1.5%) from normal distributions, then blends them by your stock/bond allocation and adjusts for inflation (dividing by 1 + inflation) to get a real return; withdrawals come out at the start of each simulated year
• Draws a new return and inflation observation independently for each year; it is not a historical bootstrap and does not model correlations, fat tails, valuation regimes, or serial dependence
• Expresses withdrawals in today's dollars by applying real returns; withdrawals occur at the start of each modeled year
• Defines a funded path as one whose portfolio never falls below zero through the selected horizon; ending exactly at zero after the final modeled need counts as funded
• Reports the share of synthetic paths that survive—not the probability that a real retirement succeeds

The simulator uses the starting portfolio, annual withdrawal, time horizon, and stock/bond allocation you enter. Taxes, fees, future contributions, Social Security, pensions, account access rules, and other personal circumstances are not modeled.

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 and are not fully captured by general calculators
• Social Security timing: Benefits are not inferred; compare official SSA estimates separately
• 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

How to Use the Illustrations:

• Use these tools to compare assumptions, not as precise predictions or recommendations
• 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:

• Annually: Verify displayed IRS, SSA, CMS, and other statutory figures before advancing the content year
• As needed: Review market assumptions and version material calculation changes
• 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.