Methodology
A detailed look at the assumptions behind every calculator on this site — what they mean, where the default numbers come from, and what "Advanced options" lets you change.
Real vs. nominal returns
Every calculator on this site defaults to a "real" (inflation-adjusted) rate of return rather than the raw, "nominal" number you'll see quoted for stock market performance. This matters because your expenses will cost more in the future in nominal dollars, purely due to inflation — but if we model everything in today's purchasing power (real terms) instead, we can hold your expenses flat across the whole projection and get the identical answer, with much simpler math. That's why holding expenses constant in these calculators is correct, not an oversight: it only works because the return rate is also expressed in real terms.
Where the default 7% comes from
The default return assumption on every calculator here (~7%) is a widely-cited approximation: the U.S. stock market (S&P 500, including dividends) has historically returned roughly 10% per year in nominal terms over the long run, while U.S. inflation (CPI) has averaged roughly 3% per year over the long run. Combining those with the Fisher equation — (1 + nominal) ÷ (1 + inflation) − 1 — gives a real return of about 6.8%, which rounds to the "~7% real return" figure used across this site and, not coincidentally, across most of the FIRE community. These are long-run historical averages, not predictions — actual year-to-year returns vary enormously (which is exactly what our Monte Carlo calculator is built to show).
What "Advanced options" changes
Each calculator's return field has a "Show advanced options" toggle. Turning it on replaces the single real-return input with two separate inputs — nominal investment return and inflation rate — and derives the effective real return from them automatically, shown live as you adjust either one. This is useful if you want to model a specific belief about future inflation or a specific portfolio's expected nominal return (e.g. a more bond-heavy, lower-volatility mix) rather than relying on the default blended assumption.
The 4% safe withdrawal rate
The default 4% safe withdrawal rate traces back to the "Trinity Study" (1998), which tested how various fixed withdrawal rates would have survived historical 30-year retirement periods using a stock/bond portfolio. A 4% initial withdrawal rate, adjusted for inflation each year, had a high historical success rate over 30-year periods. It's a widely-used starting point, not a guarantee — a longer retirement, a more conservative portfolio, or unusually poor early-retirement market returns can all reduce its safety margin. That's part of why Fat FIRE plans on this site default to a more conservative 3.5%, and why the Monte Carlo calculator exists — a fixed withdrawal-rate rule of thumb doesn't capture "sequence of returns risk" the way a full simulation does.
How the Monte Carlo simulation works
Instead of assuming one fixed return every year, the Monte Carlo calculator runs your plan through 3,000 randomly generated scenarios, each drawing a different annual return (based on the average return and volatility you set) for every year of your plan — both the years you're still contributing and the years you're withdrawing in retirement. A scenario "fails" if its balance ever hits zero during retirement. Your probability of success is simply the share of the 3,000 scenarios that never ran out of money. It's a simplified model (returns are drawn independently each year from a normal distribution, rather than replaying actual historical market sequences the way tools like FIRECalc or cFIREsim do), but it captures the same core risk: a bad stretch of returns early in retirement is far more damaging than the same bad stretch later on.
Limitations worth knowing
None of these calculators account for taxes, Social Security, pensions, healthcare cost changes, part-time income beyond what you explicitly enter, or changes to your spending over time (beyond what "Advanced options" lets you adjust). They're planning aids for understanding orders of magnitude and directional tradeoffs, not a substitute for a full financial plan. See our Terms of Service for the full disclaimer.