FIRE glossary
Inflation / Real Terms
Modelling in real terms strips inflation out of a projection, so a pound, dollar or euro figure represents the same buying power whether it's dated today or decades from now.
What "real" means, in plain terms
A £50,000 salary today and the same £50,000 salary paid in thirty years' time aren't worth the same thing — the second one buys noticeably less if prices have kept rising in between. "Real terms" removes that erosion mathematically, so every figure in a projection is expressed in today's buying power rather than the inflated pounds a future year will actually use. A "real return" is, roughly, the growth left over once inflation has been subtracted from the raw ("nominal") return a fund or account quotes — the number that actually reflects how much richer, or poorer, an investment is making you.
Why Ember runs on real terms by default
Ember's engine takes a single inflation assumption and a real expected return per asset class, and converts nominal inputs — a salary, a fixed contribution schedule — into real terms once, at the point they enter a projection, rather than mixing nominal and real figures together partway through the maths. That single-conversion-point design matters: blending nominal and real numbers mid-projection is one of the more common ways a DIY retirement spreadsheet quietly overstates how far a pot will stretch. The FIRE date and required pot Ember shows are always computed on this real basis; nominal figures stay available to look at — toggle to nominal on the net-worth chart, for instance — but they never drive the headline result.
A small inflation number, a large effect
Because a real return is what's left after inflation is subtracted out, a modest change to the inflation assumption moves every real return in the plan by roughly the same amount — and that effect compounds across a 40–50-year early-retirement horizon. Ember keeps the nominal portfolio-return input right next to the inflation-assumption input wherever you edit either one, specifically so a well-meaning edit to one figure doesn't silently drift out of step with the other.
Across borders
Different countries run different inflation rates, so a plan that spans a move between them is implicitly using a single blended assumption unless you account for the shift directly. An expat earning in one currency and eventually spending in another is really carrying two separate real-terms questions at once — domestic inflation in the country they'll actually spend in, plus the exchange-rate path between the two currencies — and a real return calculated only against home-currency inflation can still lose ground against the true cost of living abroad. Ember's engine uses one inflation assumption per plan, so a residency change worth modelling is worth revisiting that assumption too. See the geoarbitrage term for how Ember handles the cost-of-living side of the same gap.
Common questions
Why does my FIRE number use real terms instead of the bigger nominal figures I see quoted elsewhere?
Nominal figures grow with inflation, but so does everything you'd spend that money on — a nominal-only projection can look more comfortable than it actually is. Real terms keeps the comparison honest: today's spending target measured against today's buying power, projected forward on the same basis.
Can I see nominal numbers in Ember at all?
Yes — you can toggle to nominal figures in places like the net-worth chart, but the FIRE date and required pot that drive the headline plan are always computed in real terms; nominal is for reference, never the driving calculation.
Does the inflation rate I choose actually matter that much?
More than it looks. Because a real return is a nominal return with inflation subtracted out, a small change to the inflation assumption shifts every real return in the plan, and that shift compounds over a multi-decade early-retirement horizon — which is why Ember keeps the nominal return and inflation inputs side by side wherever you edit them, rather than letting one drift out of sync with the other.
Related terms
See inflation / real terms in your numbers
The free calculator gives a rough estimate; the full planner models your actual accounts, pensions, residency moves and taxes — with the maths behind every figure shown.