Enter what you already have to invest and how much you plan to add each month. If you expect to raise your monthly contribution as your income grows, put a yearly increase in the next box. Then add the return you expect, the yearly fees charged by your fund or platform, and the number of years you will stay invested.
The tax and inflation boxes are optional. Tax is taken from the gain only, not from the money you put in. Inflation lets you see what the final amount would be worth in today’s prices, which is the number that really tells you what you could buy with it.
After you press Calculate, you will see the final value, how much of it is your own money and how much is growth. A year by year table shows how the balance builds up. Notice how the growth column starts slowly and speeds up later. That is the effect of earning returns on earlier returns. Keep in mind that returns are not guaranteed, so it can help to run the numbers with a lower return as well.
The calculator converts the net yearly return into a monthly rate: monthly rate = (1 + return – fees) raised to 1/12, minus 1. Each month the balance is multiplied by (1 + monthly rate) and then the monthly contribution is added.
Every twelve months the contribution is raised by the yearly increase you entered. Growth is the final balance minus everything you paid in. Tax is the growth times the tax rate. The inflation adjusted value is the after-tax value divided by (1 + inflation) raised to the number of years.