FI target number now vs. at retirment -- do I factor in Inflation?

for me there is no right answer as your FI number is just a compass heading. That’s all.

Using $3m in today’s dollars works. You can adjust for inflation sure.

But I would start with expenses, is the 120k what you’ll be spending in retirement? Maybe house will be paid off by then, kids growing and more expenses, or living on their own and that cost gone… if you look forward to what expenses may be when you retire then use that to calculate FI number in today’s dollars. You then may realize you’re closer than you think.

And once you hit the 50% threshold of one of these numbers, time to put away FI number and start doing detailed future projections using tools like portfolio visualizer or projection lab or a new one I found readyaimretire. Free versions work good enough to get you going.

Your FI target is $3M in 2026 dollars. So yes, you should adjust for FI target with inflation (or more specially, with your planned spending each year).

If you are projecting ~3% inflation over the next 10 years, then yes, your 2036 spending would be about $160k and your FI target in 2036 would be ~$4M. Alternatively, you can just adjust the numbers each year based on the previous year's inflation.

I personally adjusted my spending and FI target each year and always viewed it in terms of "today's" dollars. So in 2027, I would increase $120k by whatever inflation was for the previous year, and then re-compute my FI target. Assuming 3% inflation, then my spending would be $123k and target $3.075M. While this sometimes felt like moving the goal post, it was easier for me to keep track.

If you use $4M in 2036, you'll still need to adjust that number by actual inflation every year… so you can't really get away from moving the goal posts.