Two portfolios averaging the same 7.2% over 25 years, with the same $4,000 taken out each year, end at $360,887 and $104,342. The only difference is the order the returns arrived in. A calculator that assumes a fixed rate cannot show you this — and it is the largest risk in any plan that involves withdrawing money.
Investment Calculator
LiveFees are deducted from the return before it compounds, which is how a real charge works. Set inflation to zero to see the projection in future money instead of today’s.
The risk a fixed-rate projection cannot show
| $100,000, $4,000 withdrawn a year | Average return | After 25 years |
|---|---|---|
| Good years first | 7.2% | $360,887 |
| Bad years first | 7.2% | $104,342 |
| Difference | None | $256,546 |
What fees actually cost
A fee is charged on the whole balance every year, so it takes the growth that money would have made as well as the money itself. On $10,000 plus $500 a month at 7% over 25 years:
| Annual fee | Final value | Cost of the fee | As a share |
|---|---|---|---|
| 0% | $462,290 | — | — |
| 0.25% | $443,178 | $19,112 | 4.1% |
| 0.5% | $424,980 | $37,310 | 8.1% |
| 1% | $391,147 | $71,143 | 15.4% |
| 2% | $332,568 | $129,722 | 28.1% |
A 2% fee does not cost 2%. It costs 28.1% of the final balance. That is the compounding argument turned against you, and it is the reason index funds charging 0.05–0.20% displaced actively managed funds charging 1.5% for most ordinary investors. The fee is also the only number on this page you can change by filling in a form.
Real money and future money
| Projection | In future dollars | What it buys today |
|---|---|---|
| 25 years at 2% inflation | $424,980 | $259,039 |
| 25 years at 2.5% | $424,980 | $229,230 — 46% gone |
| 25 years at 3% | $424,980 | $202,973 |
| 25 years at 4% | $424,980 | $159,417 |
Half a percentage point of inflation is worth $29,808 on that projection — comparable to a meaningful fee difference, and entirely outside your control. A projection in future dollars is not wrong; it simply answers a different question from the one most people are asking, which is what the money will buy.
Where the 7% comes from, and what it hides
| Assumption | Typical basis | What it leaves out |
|---|---|---|
| 7% a year | US large-cap history, roughly 10% nominal less 3% inflation | That it is an average of a very wide range, and that it is one country over one period |
| Steady annual growth | Makes the arithmetic possible | Markets have never done this. Sequence is the risk this hides |
| Dividends reinvested | Standard in total-return figures | Whether yours are, and whether tax is taken first |
| No tax | Depends entirely on the account | The single largest omission for a taxable account |
| You do not sell | The projection assumes discipline | The behaviour gap. Investors typically earn less than their own funds do |
Common mistakes
Frequently asked questions
What return should I assume?
Seven percent after inflation is the conventional figure for a diversified equity portfolio, taken from long-run US history. It is an average of an extremely wide range and it is one market over one period. Running the projection at 5% and 9% as well tells you more than any single number can.
What is sequence of returns risk?
The order returns arrive in, which matters once you are withdrawing. Two portfolios averaging 7.2% over 25 years with $4,000 taken out annually end at $360,887 or $104,342 depending on whether the bad years came first. Withdrawing during a fall sells more units to raise the same cash, and those units are not there to recover.
How much do fees really cost?
Far more than the percentage suggests. On $10,000 plus $500 a month at 7% over 25 years, a 1% annual fee costs $71,143 — 15.4% of the final balance, not 1%. A 2% fee costs 28.1%. The charge applies to the whole balance every year, so it takes the growth that money would have made as well.
Should the projection account for inflation?
If it runs more than a decade, yes. At 2.5% inflation a $424,980 projection buys $229,230 in today’s money — 46% of the headline is purchasing power that will not exist. The calculator above shows both; set inflation to zero for the future-dollar figure.
Is a market fall bad while I am still contributing?
No — it is an advantage. The same monthly amount buys more units at lower prices, and those units recover. Sequence risk runs the other way: it hurts when you are taking money out, which is why the years around retirement matter more than any other stretch.
Does compounding frequency matter much?
Less than people expect. Moving from annual to monthly compounding at 7% is worth about 0.23 percentage points of effective return. That is real but small against a fee difference of 1%, and negligible against the assumed return being wrong by two points.
Why is my actual return lower than the fund’s?
Because a fund reports the return of holding it throughout, and most people do not. Money tends to arrive after a rise and leave after a fall, which mechanically produces a lower personal return than the fund’s published figure. No projection can model this, and for many investors it costs more than fees do.
Is anything I enter sent anywhere?
No. Everything runs in your browser with no server request, and works offline once the page has loaded. Nothing is written to disk and nothing persists after you close the tab.
Sources
- Bengen WP. “Determining Withdrawal Rates Using Historical Data.” Journal of Financial Planning, 1994. The paper that identified sequence of returns as the binding constraint on a withdrawal plan.
- Cooley PL, Hubbard CM, Walz DT. “Retirement Savings: Choosing a Withdrawal Rate That Is Sustainable.” AAII Journal, 1998 — the Trinity Study, which tested withdrawal rates against historical sequences rather than averages.
- US Securities and Exchange Commission, investor.gov. The regulator’s own compound interest and fee calculators, and its guidance on how small annual fees compound.
- Dalbar Inc. Quantitative Analysis of Investor Behavior, published annually since 1994. The source for the gap between fund returns and investor returns.
- Formula. With monthly contributions, the balance after each period is
balance × (1 + r) + contribution, whereris the annual return less fees divided by the number of periods. Real value isnominal ÷ (1 + inflation)^years.
Every figure on this page is computed from the formulas above rather than quoted, so the article and the calculator cannot disagree. No tax is modelled, because the treatment depends entirely on the account type and the country — and for a taxable account that is the largest omission here.
Related calculators
See the full list of Financial calculators, or try:
- Compound Interest — the mechanism on its own
- Retirement Calculator — the pot converted to income
- 401(k) Calculator — the employer match, priced
- Inflation Calculator — purchasing power over time
- Rule of 72 — doubling time in your head
- CAGR Calculator — what a past return actually was
- Percentage Calculator — gains and losses are not symmetric