How we calculate

Last reviewed October 2026

A calculator is only useful if you can see how it reaches its answer. This page describes the formulas behind the calculators on MoneyLifeCalc, the official sources for the figures that change each year, what the estimates leave out, and how the site is maintained.

Who builds and writes this site

MoneyLifeCalc is built and written by its founder, an architectural designer who has tracked personal income, expenses, and investments in a spreadsheet workbook for more than 30 years. The calculators began as the formulas in that workbook. The story is on the About page.

The site is written from the point of view of a careful individual investor and homeowner. Its author is not a licensed financial adviser, CPA, attorney, or lender, and nothing here is personal advice. Where a subject calls for a professional, the pages say so.

How the calculators work

Every calculation runs in your own browser, using plain arithmetic you could reproduce in a spreadsheet. Nothing you type is sent to us. Each calculator page has a "How this calculator works" section, a worked example that uses the numbers shown when you first open the page, and a note listing its main assumptions.

Loans and mortgages

• Payments use the standard amortization formula for a fixed-rate loan: payment = P × r ÷ (1 − (1 + r)⁻ⁿ), where P is the amount borrowed, r is the monthly rate (the annual rate divided by 12), and n is the number of monthly payments.
• Mortgage payment adds property tax, homeowners insurance, HOA dues, and private mortgage insurance when the loan is more than 80% of the price. Mortgage insurance is shown as ending when the balance reaches 78% of the original price.
• Mortgage affordability applies the 28/36 guideline to gross monthly income, takes the lower of the two limits, and solves for the largest loan whose principal, interest, tax, and insurance fit.
• Refinance break-even divides closing costs by the monthly saving. Net savings compares total payments on each loan over the years you stay, plus each loan's remaining balance at that point.
• Rent vs. buy steps month by month for 30 years. The renter invests the down payment and closing costs, and whichever side pays less each month invests the difference. Buyer wealth is the home's value after selling costs, minus the loan balance, plus any investments.

Saving, investing, and debt

• Growth is compounded monthly at one-twelfth of the annual return you enter, with contributions added each month.
• Debt payoff is simulated one month at a time: interest is added to each balance, minimum payments are made, and the remaining money goes to the target debt chosen by the snowball or avalanche order.
• Credit card minimum payment recalculates the minimum each month from the formula you select, with the floor you enter, until the balance is gone.
• Roth vs. traditional compares the same before-tax amount invested each year: taxed on the way out at your retirement rate, or taxed on the way in at your current rate.

Retirement and taxes

• Retirement planner steps one year at a time. Expenses and Social Security rise with inflation, pension and other income stay level, the shortfall is taken from savings at the start of the year, and the remainder grows at your return. The savings, return, and spending "needed" are found by repeating that simulation until the money just lasts.
• Social Security claiming age uses the Social Security Administration's rules: a reduction of five-ninths of 1% for each of the first 36 months before full retirement age and five-twelfths of 1% for each additional month, and an increase of two-thirds of 1% for each month after it, up to age 70.
• Income tax estimate subtracts pre-tax contributions, applies the larger of the standard or itemized deduction and the deduction for people 65 and older, runs the result through the federal brackets for the year selected, and subtracts the child tax credit.
• Paycheck calculator applies the same federal brackets and standard deduction to yearly pay, Social Security tax of 6.2% up to the wage base, and Medicare tax of 1.45% plus 0.9% above $200,000, then divides by your number of paychecks.
• Required minimum distribution divides the prior year-end balance by the factor for your age in the IRS Uniform Lifetime Table.

Construction and home improvement

• New construction cost multiplies heated square feet by a cost per square foot, prices garages at 45% and porches at 35% of that rate and unfinished basements at 50% unless you enter your own, then adds site work, a percentage for design and permits, and a contingency.
• Construction loan draw schedule spreads your stages evenly across the build, spends your own cash before loan funds, and charges interest monthly on the amount drawn.
• Home improvement cost multiplies a low and high unit cost for each project type by your quantity, a finish-level factor, and your contingency.

Where the figures come from

• Federal tax brackets, standard deductions, and the child tax credit: the IRS's annual inflation adjustments. Tax year 2026 uses Revenue Procedure 2025-32. Tax year 2025 uses Revenue Procedure 2024-40 as amended by the 2025 tax law.
• Social Security wage base and benefit rules: the Social Security Administration, including its pages on early retirement reductions and delayed retirement credits.
• Required minimum distribution factors: the Uniform Lifetime Table in IRS Publication 590-B.
• Retirement plan contribution limits: the IRS's yearly announcement of cost-of-living adjustments.
• Construction and remodeling costs: these are our own rough national ballpark figures, not quotes and not taken from a single published index. They are there so the calculator shows something sensible when you open it. Replace them with bids for your own project and location as soon as you have them. Where a guide cites a survey, such as the National Association of Home Builders' construction cost survey, it links to it.

What the estimates leave out

Every calculator simplifies. The most important simplifications are these:

• Investment returns are assumed to be the same every year. Real returns vary, and the order in which good and bad years arrive matters, especially in retirement.
• Projections are in future dollars unless a page says otherwise, and most do not include taxes on investment growth or account fees.
• The tax calculators cover the common case of wage income with the standard deduction. They leave out self-employment tax, capital gains rates, the alternative minimum tax, and most credits. State tax is a single flat rate that you enter.
• Loan calculators assume a fixed rate, payments made on time, and no fees beyond those you enter.
• Social Security figures do not include spousal or survivor benefits, taxes on benefits, or the earnings limit before full retirement age.

Each page lists its own assumptions in the note under the result. Treat every result as a planning estimate and confirm important decisions with a qualified professional.

How the site is kept up to date

• Every fall, after the IRS and the Social Security Administration publish the next year's figures, the tax brackets, deductions, wage base, and contribution limits are added for the new year. Earlier years stay available in the tax calculators.
• Each calculator page shows the month it was last reviewed, and each guide shows the month it was last updated.
• New calculators and guides are added in response to what visitors ask for through the suggestion form.

Corrections

If you find a result that looks wrong or a figure that is out of date, please tell us through the contact page. Say which page, what you entered, and what you expected. Confirmed errors are fixed and noted in the update log below.

Independence

The site may show advertising, and in the future some pages may link to partner companies. Neither affects how any calculator works. Results are never adjusted to favor an advertiser or partner, and any partner link will be labeled. See the privacy policy and terms of use.

Update log

• October 2026: Added a worked example, a guide to reading the results, common mistakes, and more common questions to every calculator page. Published eight new guides. Added this page and expanded the contact page.
• September 2026: MoneyLifeCalc launched with its first calculators and guides.