Beacon methodology: how the FI date model works

Beacon's model is deterministic. That means the same inputs produce the same output every time. It is built to make assumptions visible, not to predict markets or replace professional advice.

The core assumptions

The model starts with five user-controlled inputs: current investable assets, annual spending, annual savings, expected annual return, and withdrawal rate. Each input changes the projected FI date.

• Current investable assets: the starting portfolio value used in the FI model.
• Annual spending: the spending level the portfolio is intended to support.
• Annual savings: the amount added to investable assets each year before FI.
• Expected annual return: the constant nominal growth rate applied by the model.
• Withdrawal rate: the percentage used to convert annual spending into a portfolio target.

Formula 1: the FI target

The first calculation is the portfolio target. Beacon divides annual spending by the withdrawal rate you choose.

Example: if annual spending is $80,000 and the withdrawal rate is 4%, the FI target is $2,000,000. If the withdrawal rate is 3.5%, the target rises to about $2,285,714.

Formula 2: projected assets

Beacon then projects assets forward using current investable assets, ongoing savings, and the expected annual return. The model treats return as a smooth constant assumption.

In plain terms: each period, the portfolio grows by the expected return and receives new savings. Beacon identifies the first period where projected assets meet or exceed the FI target.

Formula 3: the FI date

The FI date is the first date when projected investable assets reach the target. If the current assets already exceed the target, the model shows that FI has already been reached under the chosen assumptions.

Worked example

Assume current investable assets of $500,000, annual spending of $90,000, annual savings of $40,000, an expected annual return of 6%, and a 4% withdrawal rate.

The FI target is $2,250,000. Beacon projects the $500,000 starting point forward, adds savings over time, applies the selected return assumption, and finds the first month where projected assets reach $2,250,000.

If spending rises to $110,000, the target becomes $2,750,000. If annual savings rises to $60,000, the date moves earlier. If the expected return falls to 4%, the date moves later. The value of the model is seeing those relationships clearly.

What the model does not include

Beacon's deterministic calculation intentionally leaves out factors that require broader planning judgment or stochastic modeling.

• Market volatility and sequence-of-returns risk.
• Taxes, account withdrawal rules, fees, and contribution limits.
• Inflation unless you reflect it in spending or return assumptions.
• Unexpected life events, health costs, family changes, or relocation.
• Pension income, government benefits, rental income, or part-time work unless you model them separately in your assumptions.

How to use the output responsibly

Use the FI date as a planning signal. It can help you compare scenarios, pressure-test assumptions, and decide which variables deserve attention. It should not be used as a guarantee or as a substitute for advice from qualified professionals.

The strongest use of Beacon is iterative: update your assets, revisit your spending, adjust assumptions when your plan changes, and keep the logic visible.

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