I plugged some example numbers into the early retirement calculator at Networthify: a $50,000 annual income, $15,000 of annual expenses, and a starting net worth of $100,000.
I’m confused about one of the columns in the table at the bottom: “5% return on investment.” This column seems to be calculated as
ROI = 5% × (previous year’s net worth + ½(income − expenses))
Why is this factor of 1/2 being applied to the savings amount? Is it some kind of averaging to account for the fact that the savings aren’t all present on the first day of the year?