Methodology

Updated May 23, 2026 · Reviewed May 23, 2026 by Charlie

This page collects the assumptions, formulas, and data sources that drive every calculator and article on the site. If a number on Nest Egg Numbers surprises you, the answer should be on this page.

Default assumptions

• Inflation: 2.5% per year. Long-run CPI-U average from BLS data.
• Nominal equity return: 7% per year. Approximate long-run real S&P 500 plus assumed inflation.
• Real return: computed as (1 + nominal) / (1 + inflation) - 1, not subtracted naively.
• Contributions: applied annually, after the year's growth.
• Withdrawals: year one uses the entered withdrawal; later years inflate annually.
• Monte Carlo: 1,000 paths per analysis, returns drawn from a normal distribution calibrated to the chosen stock/bond preset.

Per-calculator formulas

FIRE Number

FIRE Number = Annual Expenses / Withdrawal Rate. Time-to-FIRE projects the portfolio year by year with annual contributions and a real return computed from the nominal-return and inflation inputs. See the FIRE number calculator.

Coast FIRE

Coast FIRE = FIRE Number / (1 + Real Return)^Years. The model also walks year by year to find the age your savings first cross the threshold. See the Coast FIRE calculator.

Safe Withdrawal Rate Analyzer

Each simulation draws an annual return from a normal distribution matching the selected stock/bond preset, applies it to the portfolio, then subtracts the year's inflation-adjusted withdrawal. A run is recorded as a success if the portfolio stays above zero for the full horizon. The rate comparison panel reruns the model at 3%, 3.5%, 4%, 4.5%, and 5%. See the SWR Analyzer.

Sequence of Returns Risk

A deterministic baseline path is compared against a stressed path. The stressed path replaces selected calendar years with simplified historical downturn sequences (dot-com, GFC, COVID, stagflation, generic bear). Withdrawals continue throughout. See the sequence of returns risk calculator.

City Retirement

City-adjusted spending equals base spending × composite index, where the composite index is weighted 35% housing, 15% food, 15% healthcare, 15% taxes, 10% transportation, 10% utilities. Those weights derive from BLS Consumer Expenditure Survey shares for households 55+. The portfolio path then behaves like the SWR fixed-strategy model with city-adjusted spending. See the city retirement calculator.

How we treat uncertainty

• Normal distributions are easier to reason about than empirical bootstraps, but they understate fat tails. Treat all probability outputs as a planning tool, not a forecast.
• Defaults are conservative-ish, but they are not magic numbers. Vary inputs to see how sensitive the output is to your assumptions.
• We never model taxes precisely, never collect your financial data, and never call back to a server with your inputs.

What we do not model (yet)

• Full federal and state income-tax simulation
• Social Security claiming optimization
• Pensions, annuities, rental income, or specific real-estate holdings
• Healthcare-cost growth different from headline CPI
• Account-type sequencing (taxable vs traditional vs Roth)

Each of these is on the future-work list. We would rather ship a transparent simple model than a black box that pretends to be complete. Pair the calculator with a qualified advisor before making irreversible decisions.

Editorial & review process

Calculator math is unit-tested. Each calculator page lists its formulas, assumptions, and limits in a dedicated methodology panel. Articles are written or reviewed by Charlie, who reached financial independence in 2025 and runs every model against personal numbers before publication. See the editorial policy for review cadence and correction process.