Two Investors, Same Goal, Very Different Reactions
Meet Jim and Dwight. Both want to spend $120,000 a year in retirement. Both need roughly $3 million invested to make that happen.
Twenty years go by. Jim checks his account. It shows exactly $3 million. High five. He hit the number.
Dwight checks his account. It shows $5,418,000. His first thought is that something went wrong — he got lucky, the calculator was broken, or he misunderstood the target.
Here is the twist: Dwight actually hit his goal. Jim did not.
If that sounds backwards, that is exactly why the hidden math of inflation quietly wrecks so many retirement projections.
📺 Watch the full video above — I walk through the actual spreadsheet math and show you the exact formula on screen.
Real Numbers vs. Nominal Numbers
You have probably heard some version of “you need $1 million, $2 million, $3 million to retire.” That figure comes from a standard withdrawal strategy where a portfolio safely generates a set amount of annual income.
Mention $1 million as a target and the comments fill up fast: “That won’t be enough in 20 years because of inflation.” There is a missing detail in that comment, and that missing detail is where most of the anxiety comes from.
When someone says you need $3 million to retire, they mean $3 million in today’s purchasing power. What $120,000 buys you right now. That is the real number — real, as in adjusted for inflation.
A nominal number is the opposite. It is whatever your account statement actually says on the day you check it, with no inflation adjustment at all.
Because prices rise every year, hitting the same real lifestyle later always requires a bigger nominal number than it does today.
The further out your timeline runs, the bigger your nominal number is supposed to look. If your number looks smaller than your real target, that is the actual warning sign.
The Math Behind Dwight’s $5.4 Million
If inflation averages 3% a year, close to the long-run U.S. average, a dollar 20 years from now is worth meaningfully less than a dollar today.
To have $3 million of today’s purchasing power 20 years from now, you do not need $3 million in your account. You need $3 million multiplied by 1.03 to the 20th power. That works out to $5,418,300.
That is Dwight’s number exactly. It is not overshooting. It is precisely what a $3 million real target is supposed to look like after 20 years of inflated dollars. If his balance had come in lower than that, that would have been the actual warning sign.
| Jim | Dwight | |
| Target (today’s dollars) | $3,000,000 | $3,000,000 |
| Account balance after 20 years | $3,000,000 | $5,418,300 |
| First reaction | Feels like he made it | Feels like he overshot or made an error |
| Real purchasing power | $1,661,000 (in today’s dollars) | $3,000,000 (in today’s dollars) |
| Real annual income supported | $66,440/yr | $120,000/yr |
| Actual result | Missed the target by $53,560/yr | Hit the target exactly |
Jim’s account showing $3 million only buys about $1,661,000 worth of today’s purchasing power. His real annual income drops to $66,440, not $120,000. That is a cut of over $53,000 a year, every year, for the rest of his retirement.
Jim thought he made it because of one number in isolation. He was actually $1.3 million short of his real target.
This assumes no Social Security or pension income layered on top. The example isolates the investment portfolio on its own to make the mechanic clear.
I Made This Exact Mistake in 2025
I felt the Jim moment firsthand when I built out my own Coast FIRE projection in 2025.
The spreadsheet originally spit out a nominal number for my eventual portfolio. It looked absurd. Genuinely too large to make sense at a glance.
So I adjusted it to show real dollars instead, accounting for inflation the whole way through. If you have used the Coast FI calculator linked in the description, this is exactly why it only shows real numbers now.
Here is the actual example from that sheet. Target lifestyle: $120,000 a year in today’s money. That requires $3 million today.
| Number Type | Value at Age 65 |
| Real target (today’s purchasing power) | $3,000,000 |
| Nominal balance shown on statement | ~$7,700,000 |
| Purchasing power of that nominal balance | Same as $3,000,000 today |
Assuming a standard 10% market return with 3% inflation, the real, purchasing-power-adjusted balance at 65 comes out to $3.3 million. That is the number that actually matters.
But the nominal number on the actual account statement that day will read closer to $7.7 million. Seeing that number without context would make anyone think they have far more than they need. They do not. It carries the exact same purchasing power as the $3 million goal.
$1 million as a target today could realistically show up as $1.2 million or more on a future statement and still mean exactly the same thing in real terms.
The Real vs. Nominal Test
Anytime you see a number like $3 million in a retirement projection, or your own account balance looks surprising, ask two questions before reacting at all.
Question 1: Is this a real number or a nominal number?
Question 2: What year is it measured in?
Those two questions alone would have told Jim he was not actually done. And they would have told Dwight he was exactly on track instead of panicking that something had gone wrong.
Stop judging your progress by staring at an account balance in isolation. That number was never supposed to equal your real target on its own — it needs the inflation context to mean anything.
📊 Use the Same Inflation-Adjusted Sheet I Built
The free Coast FI Calculator now shows real, inflation-adjusted numbers only, so you never mistake a nominal balance for hitting your actual goal.
â–º Free Coast FI Calculator — sharpemoney.gumroad.com/l/tkddmi
The Bottom Line
A larger account balance later is not a red flag. It is the math working correctly, as long as it is measured against your real, inflation-adjusted target rather than judged against today’s dollar value in isolation.
If your projected balance looks bigger than your target, even a lot bigger, that is inflation doing exactly what it is supposed to do to your nominal number. If it looks smaller than your real target, that is the number worth worrying about.
Model your own number correctly, whether the goal is travel, cruises, or simply giving back. And if you want to see how I calculated my own real number and what I did once I hit it, read this next: I Calculated My Coast FIRE Number. It Changed Everything.