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The correct calculation is actually Retirement / (1 + inflation%) ^ number of years. Thinking back to your original calculation for calculating future values, you'd expect that you could get back to exactly the same number ($100,000) by applying your second formula to the result. Given that you multiplied by the effect of inflation to get from the present ...


Using a compound annual rate as a standard measure makes comparison easier. Trying to compare a X% rise over Y years to a W% rise over Z years requires a bit of math to figure out the equivalency. If everyone lists numbers as an annual rate, a child could tell you which number is bigger without grabbing a calculator. Standards tend to be semi-arbitrary, ...

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