How It Works

A transparent look at how we calculate your retirement projections.

Deterministic Projection

The basic projection calculates your portfolio growth month-by-month using constant assumptions:

1
Start with current assets

Your current portfolio value (e.g., $500,000)
2
Apply monthly return

Monthly return = ((1 + annual return − fees) / (1 + inflation))^(1/12) − 1

Default: 6.5% return − 0.25% fees − 3% inflation ≈ 3.15% real return
3
Add monthly contribution

Your regular savings (e.g., $2,000/month)
4
Repeat until target reached

Continue until portfolio equals your target number

nextBalance = currentBalance × (1 + monthlyReturn) + monthlyContribution

Today's Dollars vs Future Dollars

Today's Dollars

Default

All values are adjusted for inflation and shown in purchasing power you understand today.

Best for: Understanding what your money can actually buy

Future Dollars

Shows the nominal dollar amount without inflation adjustment. Numbers will be larger but represent less purchasing power.

Best for: Matching account statements

Monte Carlo Simulation

The deterministic projection uses constant returns, but reality is volatile. Monte Carlo simulation runs 1,000 scenarios with randomized returns to show a range of possible outcomes.

Optimistic

90th Percentile

Top 10% of outcomes

Typical

50th Percentile

Median outcome

Conservative

10th Percentile

Bottom 10% of outcomes

How it works:

Generate random annual returns using a normal distribution (mean: expected return, std dev: ~12%)
Run the projection 1,000 times with different random returns
Sort results to find percentiles (10th, 25th, 50th, 75th, 90th)
Calculate success rate (% of runs that reached the target)

Safe Withdrawal Rate (SWR)

The Safe Withdrawal Rate determines how much you can spend annually in retirement without running out of money. The classic "4% Rule" means:

Annual Spending

Portfolio × 4% = $40,000/year

(on a $1,000,000 portfolio)

We also support:

CAPE-based SWR: Adjusts withdrawal rate based on market valuation
Variable Percentage Withdrawal: Withdraw a fixed % of current balance
Guyton-Klinger: Guardrails that adjust spending based on portfolio performance
Floor/Ceiling: Set minimum and maximum spending bounds

Learn more about withdrawal strategies

Default Assumptions

Assumption	Default Value	Rationale
Nominal Return	6.5%	Slightly below historical average (~7%)
Inflation	3.0%	Historical long-term average
Fees	0.25%	Low-cost index fund expense ratio
Safe Withdrawal Rate	4.0%	Trinity Study / Bengen research
→ Real Return	~3.15%	(1 + 6.5% - 0.25%) / (1 + 3%) - 1

All assumptions are visible and adjustable in the app. We recommend reviewing them to match your personal situation and risk tolerance.