Assumptions

Inflation, investment returns, the three built-in return scenarios, and how official published figures differ from projected forward-year assumptions.

Inflation

Living expenses are assumed to grow with inflation every year. If you enter $60,000 as your annual spending today, the engine will need progressively more from your portfolio in later years to maintain the same purchasing power.

For example, at 3% inflation $60,000 today becomes approximately $80,635 after 10 years and $108,367 after 20 years. The default inflation rate is 3.0%, which reflects the long-run U.S. average. You can adjust this in Step 2 of the calculator.

The Inflation Calculator

The standalone Inflation Calculator applies the same compounding at a single fixed rate, in one of two directions. Let i be the rate and n the number of years:

The “remaining purchasing power” figure is a property of inflation itself, not of which question you asked, so it is the same in both modes:

It is not derived from futureNeeded ÷ amount × 100 (in needed mode that ratio is a price-level figure — e.g. 209% — not a purchasing-power figure). The year-by-year table, the five-rate comparison, and the “$1.00 today buys …” line all use the same two formulas. The calculator models no fees, taxes, or variable inflation.

Investment returns

Each account grows at a blended rate based on its stock/bond allocation. With 70% stocks at 7% and 30% bonds at 3%, the blended rate is (0.70 × 7%) + (0.30 × 3%) = 5.8%. The engine uses a fixed annual return per scenario, not a random-walk or Monte Carlo return series — see Projection Engine for how the return is applied each year.

Scenario modeling

SmartRetireCalc always shows three parallel projections for every calculation:

• Average — your stated return rates, no adjustment.
• Below Average — every return input reduced by 1 percentage point (all four stock and bond, pre- and post-retirement rates; e.g. 7% → 6%).
• Significantly Below Average — every return input reduced by 2 percentage points (e.g. 7% → 5%).

Beyond the built-in three, the Scenarios hub provides pre-configured deep-dives (early retirement, delayed Social Security, inflation spikes, sequence-of-returns risk, bridge strategies, Roth conversion ladders), and the Scenario Comparison tool lets you build two custom scenarios side by side.

Scenario variants that change the base inflation assumption (for example the higher-inflation alternative, +1.5 percentage points) move both spending and the Social Security COLA proxy. They also drive the forward-year projection of statutory tax and Medicare thresholds described below. The temporary inflation-spike stress test does not.

Official values vs. projected assumptions

Some inputs to the model are published figures. Others are estimates the engine derives for years the government has not yet set.

Official 2026 Official values

Where a published IRS, CMS, or SSA schedule exists, the engine uses it directly. The latest official year currently wired in is 2026 — federal tax brackets, the standard deduction, the age-65 additional deduction, and the Medicare IRMAA schedule (both MAGI thresholds and Part B/D surcharge dollars).

Projected assumption Projected assumptions

For calendar-anchored years after the latest official table, the engine projects statutory dollar values rather than freezing them at their nominal 2026 amounts (which would overstate progressive tax and push flat real income across IRMAA tiers over a long projection):

• Federal brackets & deductions — inflation-projected forward using the scenario inflation assumption and the statutory rounding convention. Tax rates are unchanged. See Taxes.
• IRMAA MAGI thresholds — projected under the statutory CPI-based framework, using the scenario inflation assumption as the planning proxy for CPI. See Medicare & IRMAA.
• IRMAA surcharge dollars — projected on a separate 5.5% annual Medicare cost-growth planning assumption, independent of the scenario inflation rate. This is not statutory indexing.