Glossary — fvequals

Financial Independence Concepts

Financial Independence (FI): The state in which your investment portfolio generates enough income to cover your living expenses indefinitely, without relying on employment income. You are financially independent when your portfolio can sustain your withdrawals for the rest of your life.
FI Number: The total portfolio value required to achieve financial independence. Calculated as your projected annual retirement spending divided by your safe withdrawal rate. Your FI Number is the finish line — the portfolio balance at which your money works for you instead of the other way around.
Net Annual Spending: Your projected annual spending at retirement minus any fixed income sources (pension, Social Security, passive income). This is the amount your portfolio actually needs to fund each year. Fixed income reduces your net spending and therefore lowers your FI Number.
Savings Rate: The percentage of your income you invest toward financial independence. Higher savings rates compress the timeline to FI: a 50% savings rate can lead to FI in roughly 17 years; a 10% savings rate typically takes 40+ years. Your savings rate is calculated as after-tax income minus annual spending, divided by after-tax income.
Coast FIRE Number: The portfolio balance at which — if you stopped contributing entirely — compound growth alone would carry your portfolio to your FI Number by your target retirement age. Once you reach your Coast FIRE Number, you have "coasted" and no longer need to save aggressively to reach FI on schedule. Formula: Coast FIRE Number = FI Number ÷ (1 + r)ⁿ.
Retirement Horizon: The number of years your portfolio needs to sustain withdrawals in retirement. FVequals projects to age 100 by default, which represents a ~35-year horizon for someone retiring at 65 and a longer horizon for early retirees. A longer horizon requires a more conservative withdrawal rate.
Sequence of Returns Risk: The risk that the timing of poor market returns — particularly in the early years of retirement — permanently damages your portfolio even if long-run average returns are acceptable. A market crash in year 2 of retirement is far more damaging than the same crash in year 20, because early losses reduce the base from which future gains compound. This is why historical SWR simulations matter more than average-return projections.

FIRE Strategies

FIRE (Financial Independence, Retire Early): A movement and planning framework focused on achieving financial independence before traditional retirement age (65), enabling the option to stop working earlier than conventional planning assumes. FIRE is not one strategy — it spans a range of approaches based on how aggressively you save and how you want to live in retirement.
Traditional FIRE: The standard FIRE approach: save aggressively (typically 50–70% of income), accumulate a portfolio equal to 25× annual spending, and retire fully — living entirely off portfolio withdrawals. Traditional FIRE requires a larger portfolio and higher savings rate than other variants.
Lean FIRE: Achieving financial independence with a smaller portfolio by committing to a frugal, minimalist lifestyle in retirement. Lean FIRE practitioners typically target spending well below the median household and can reach FI faster because both the numerator (spending) and denominator (required portfolio) are smaller.
Fat FIRE: Financial independence with a high-spending retirement lifestyle — maintaining or exceeding current spending levels without compromise. Fat FIRE requires a significantly larger portfolio and typically a higher income and savings rate to achieve. The higher portfolio provides more margin against sequence risk.
Barista FIRE: A semi-retirement approach where you stop full-time work before reaching full FI, covering remaining expenses through part-time, lower-stress employment (the "barista job"). The part-time income reduces portfolio withdrawals, allowing a smaller portfolio to sustain the plan until full retirement.
Coast FIRE: A strategy where you save aggressively early in your career until your portfolio reaches the Coast FIRE Number, then stop contributing and let compound growth carry you to full FI by retirement age. After hitting Coast FIRE, you only need to cover current living expenses — you are no longer racing to build the portfolio.

Withdrawal Rate Terms

Safe Withdrawal Rate (SWR): The annual percentage of your retirement portfolio you can withdraw each year — adjusted for inflation — without running out of money over your retirement horizon. A 4% SWR on a $1,000,000 portfolio means withdrawing $40,000 in year one, then adjusting for inflation in subsequent years. The rate is "safe" if the portfolio survives the full horizon.
4% Rule: A widely cited rule of thumb stating that a 4% initial withdrawal rate, adjusted annually for inflation, is sustainable over a 30-year retirement horizon based on historical U.S. market data. Originated from William Bengen's 1994 research and refined by the Trinity Study (1998). FVequals uses the 4% rule as a benchmark but shows your actual historical success rate rather than accepting the rule uncritically.
Historical Failsafe Rate: The highest withdrawal rate that has never resulted in portfolio depletion across all historical 30-year periods in the dataset. The failsafe is more conservative than the 4% rule because it must survive every historical sequence, including the worst starting years (1929, 1966). FVequals displays the failsafe as the most conservative benchmark for your plan.
Historical Success Rate: The percentage of all historical retirement cohorts (rolling historical periods) in which your withdrawal plan would have sustained the full retirement horizon. A 95% historical success rate means your plan survived in 95 out of every 100 historical starting years tested. The remaining 5% failed — typically those starting in the worst market environments on record.
PMT Ceiling: The maximum annual portfolio withdrawal consistent with a 100% historical success rate, given your specific portfolio size, asset allocation, and retirement horizon. The PMT ceiling is expressed as a dollar amount rather than a percentage. It represents the upper bound of what your portfolio can safely sustain each year based on history.
Withdrawal Rate: The percentage of your portfolio you withdraw each year in retirement. Your FVequals withdrawal rate is calculated as: Net Annual Spending ÷ Projected Portfolio at Retirement. This rate is compared against the historical failsafe and the 4% rule to assess how durable your plan is.

Market & Economic Indicators

Shiller CAPE (PE10): The Cyclically Adjusted Price-to-Earnings Ratio, developed by Nobel laureate Robert Shiller. It divides the current S&P 500 price by the average of the prior 10 years of inflation-adjusted earnings, smoothing out short-term business cycle noise. High CAPE readings (above 30) have historically preceded periods of below-average equity returns over the following decade. FVequals uses the current CAPE to segment historical retirement cohorts by starting valuation, showing how your plan performs specifically when markets are priced like today's.
TIPS Yield: The yield on 10-year Treasury Inflation-Protected Securities — U.S. government bonds whose principal adjusts with the Consumer Price Index. The TIPS yield represents the real (inflation-adjusted) risk-free rate of return. FVequals fetches the current TIPS yield weekly from the Federal Reserve's FRED database and uses it as the baseline for bond return assumptions in your portfolio projection.
Consumer Price Index (CPI): A measure of the average change over time in prices paid by consumers for a representative basket of goods and services, published monthly by the U.S. Bureau of Labor Statistics. FVequals uses CPI data segmented by the 8 major spending categories to inflate each part of your budget at its own historical rate rather than applying a single average inflation figure to your entire spending.
Inflation: The general increase in prices over time, which reduces the purchasing power of money. A dollar today buys less than a dollar did 10 years ago. In retirement planning, inflation is the primary reason your portfolio needs to grow even during retirement — a fixed $40,000 annual withdrawal loses purchasing power every year unless the withdrawal amount is adjusted upward with inflation.
Real Return: Investment return after accounting for inflation. If your portfolio earns 7% nominally and inflation is 3%, your real return is approximately 4%. FVequals projects your portfolio using real returns, which means your spending targets are expressed in today's dollars and your portfolio growth is also expressed in today's dollars — making the comparison direct without double-counting inflation.
Equity Risk Premium: The excess return that investing in stocks provides over a risk-free investment (such as TIPS), compensating investors for the additional volatility and risk of equity markets. FVequals adds an equity risk premium to the current TIPS yield to estimate the expected real return on the stock portion of your portfolio.

Account Types

Traditional 401(k) / 403(b) / IRA: Tax-deferred retirement accounts funded with pre-tax dollars. Contributions reduce your taxable income today; withdrawals in retirement are taxed as ordinary income. Required Minimum Distributions (RMDs) begin at age 73.
Roth IRA / Roth 401(k): Retirement accounts funded with after-tax dollars. Contributions do not reduce taxable income, but qualified withdrawals in retirement are completely tax-free — including all investment growth. Roth accounts have no RMDs during the account owner's lifetime, making them valuable for tax diversification in retirement.
Brokerage / Taxable Account: A standard investment account with no tax advantages. Contributions are made with after-tax dollars; investment income and capital gains are taxed annually (dividends) or when sold (capital gains). Despite the tax drag, taxable accounts provide flexibility — no contribution limits, no withdrawal restrictions, and no penalties for early access.
Health Savings Account (HSA): A triple-tax-advantaged account available to individuals enrolled in a High-Deductible Health Plan (HDHP): contributions are pre-tax, growth is tax-free, and withdrawals for qualified medical expenses are tax-free. After age 65, HSA funds can be withdrawn for any purpose (taxed as ordinary income, like a Traditional IRA). FVequals models the HSA as a healthcare reserve in retirement.
Solo 401(k) / SEP-IRA: Retirement accounts available to self-employed individuals. The Solo 401(k) allows contributions as both employee and employer, enabling very high annual contribution limits. The SEP-IRA (Simplified Employee Pension) allows employer contributions up to 25% of net self-employment income.

Tax Terms

Effective Tax Rate: The average rate at which your income is taxed — total tax paid divided by total taxable income. Distinct from your marginal tax rate (the rate on your last dollar of income). The effective rate is what actually determines how much of your gross income becomes take-home pay.
Marginal Tax Rate: The tax rate applied to your next dollar of income. Because the U.S. uses a progressive tax system, different portions of income are taxed at different rates. Knowing your marginal rate matters when deciding between pre-tax (Traditional) and after-tax (Roth) contributions.
Payroll Tax: The combined Social Security (6.2%) and Medicare (1.45%) taxes withheld from W-2 wages, totaling 7.65% for employees. Self-employed individuals pay both the employee and employer shares (15.3% total) as Self-Employment (SE) tax, though they may deduct half of SE tax as an above-the-line deduction.
Standard Deduction: A fixed dollar amount that reduces taxable income, available to all taxpayers who do not itemize deductions. FVequals applies the standard deduction when estimating your federal income tax. For 2026, the standard deduction is $14,600 for single filers and $29,200 for married filing jointly.
Filing Status: Your tax category based on marital and household status. FVequals supports Single, Married Filing Jointly, and Head of Household. Filing status determines your standard deduction, tax bracket thresholds, and certain credit eligibility.