The Math
The assumptions and formulas behind every number on this site — and why we make the choices we do.
Two rules that govern everything
1. Default to real returns, not nominal. A 10% nominal return sounds better than a 7% real return, but the nominal number overstates the outcome because it ignores inflation. Every future dollar amount on this site is either shown in real terms or shown with its inflation-adjusted equivalent alongside.
2. Show medians, not averages. Averages in wealth data are distorted by a few extreme outliers (the billionaires in the sample). Where the data lets us, we report the median — the middle outcome, not the flattered average.
Our default assumptions
| Assumption | Default | Source |
|---|---|---|
| Real (inflation-adjusted) stock return — preferred default | 7% | Investopedia 6.81%; SmartAsset 6.5%; multiple sources ~6.5–7% |
| Nominal stock return | 10% | Damodaran 1928–2024 (9.94% compound); Investopedia 10.09% |
| Long-run inflation | 3% | BLS CPI long-run average |
| Safe withdrawal rate (FIRE) | 4% (with caveats) | Trinity study — we flag its limitations |
| Business valuation multiple | 2–4× SDE (small business) | Industry-dependent; stated as a range, not a point |
The core formulas
Why we show the working
Every calculator on this site shows its formula and its intermediate steps. The point is trust: you should be able to reproduce the number yourself, and you should see exactly which assumptions produced it. A black-box calculator is a magic trick; we show you the trick.
Limitations of every model
- Returns are modeled as constant, but real markets are volatile and sequence-of-returns matters.
- Contributions are modeled as constant, but most people save more over time.
- Taxes and fees are simplified; use tax-advantaged accounts and low-cost funds to keep them small.
- These are estimates, not forecasts or guarantees. Past performance does not predict future results.
For the full legal disclaimer, see the disclaimer page.