FinRung

Methodology

How FinRung calculates its results

Net Worth Percentile

Net worth percentile rankings are based on the Federal Reserve's Survey of Consumer Finances (SCF), most recently published in 2022. The SCF is a triennial survey that collects detailed information on U.S. household finances, including assets, debts, income, and demographics.

Calculation Method

  • Households are grouped by age of the reference person into six brackets: Under 35, 35-44, 45-54, 55-64, 65-74, and 75+.
  • For each age group, we compute net worth at key percentile breakpoints (5th through 95th).
  • Your percentile is determined by linear interpolation between the two nearest bracket points.
  • Net worth is defined as total assets minus total liabilities, including primary residence equity.

FIRE Number

The FIRE (Financial Independence, Retire Early) number is calculated using the formula:

FIRE Number = Annual Expenses / Safe Withdrawal Rate

The default safe withdrawal rate of 4% is based on the Trinity Study (Cooley, Hubbard & Walz, 1998), which found that a 4% initial withdrawal rate, adjusted annually for inflation, had a high probability of sustaining a portfolio for 30+ years across historical market conditions.

Savings Projection

The year-by-year savings projection uses a compound growth model:

Balance(next year) = Balance(current) x (1 + Return Rate) + Annual Savings

This is a simplified model that assumes constant returns and contributions. Real-world returns are volatile and unpredictable. The projection should be used as a planning guide, not a prediction.

Compound Interest

The compound interest calculator uses monthly compounding by default. For each month, interest is calculated on the current balance, then the monthly contribution is added:

Balance(month+1) = Balance(month) x (1 + Annual Rate/12) + Monthly Contribution

Data Limitations

  • SCF data is published every three years and may not reflect the most current economic conditions.
  • Percentile calculations use summary tables rather than raw microdata, which may introduce minor interpolation errors.
  • All projections assume constant returns, which does not reflect real market volatility.
  • Tax implications are not included in any calculations.

Sources