How the math works

Calculation Methodology

No black boxes. Here are the exact compounding formulas and inflation adjustments behind every tool, so you can check the math yourself.

1. Future Value & Inflation Discounting

First, we work out the future value (FV) of a lump sum using standard compound interest:

FV_nominal = PV × (1 + r)ⁿ

Then, to find what that buys in today's money, we adjust the future sum back by the annual inflation rate:

FV_real = FV_nominal / (1 + i)ⁿ = PV × [(1 + r) / (1 + i)]ⁿ

Where: PV = Present Value (initial amount), r = annual return rate, i = annual inflation rate, and n = duration in years.

Systematic monthly contributions compound at the end of each month (with payments made at the start of the month):

FV_nominal = P × [((1 + r_m)^months - 1) / r_m] × (1 + r_m)

The after-inflation value accounts for rising prices over the years you invest:

FV_real = FV_nominal / (1 + i)^years

Where: P = monthly SIP payment, r_m = monthly interest rate (r/12/100), and i = annual inflation rate.

FIRE targets use the 4% safe withdrawal rate (based on historical research like the Trinity Study):

FIRE Nest Egg (Real) = Annual Expenses × 25

We then grow this target into the future amount you'll need by the time you retire:

FIRE Nest Egg (Nominal) = FIRE Nest Egg (Real) × (1 + i)^Years