How to read the output
The gap between the two lines on the chart is compounding. Early on it is almost invisible, which is why so many people abandon the habit in year three. The curve is not linear and your intuition about it is wrong — that is the single most useful thing this model demonstrates.
- Final balance after fees is the honest number. Gross projections that ignore costs overstate outcomes by a wide margin over long horizons.
- Today's purchasing power discounts the result by your inflation assumption. A million dollars in thirty years is not a million dollars.
- Lost to fees compares a zero-fee run to your actual cost assumption. On a thirty-year horizon a 1% difference commonly removes a fifth of the final balance.
- Multiple on money in tells you how many dollars you finished with for each dollar contributed.
Try thisSet fee drag to 0.05% then to 1.05% and leave everything else alone. The difference is a house deposit. This is why wrapper and expense ratio matter more than fund selection.
Choosing sensible assumptions
| Input | Conservative | Central | Optimistic | Note |
|---|---|---|---|---|
| Equity return | 5.5% | 7.0–7.5% | 9.0% | Nominal, before fees |
| Balanced 60/40 | 4.5% | 6.0% | 7.0% | Lower volatility, lower ceiling |
| Fee drag | 0.05% | 0.35% | 1.20% | Include platform + fund + advice |
| Inflation | 2.0% | 2.6% | 4.0% | Long-run average, not this year's print |
Smooth returns are a fictionThis model applies a constant rate. Real markets deliver the same average through violent swings, and the order those swings arrive in matters enormously once you start withdrawing. Model that separately in the retirement simulator.
Three questions this tool answers well
- Is my contribution rate enough?Set the horizon to your actual retirement age and adjust monthly contributions until the real-terms figure covers your target. Nominal numbers flatter; use the inflation-adjusted one.
- What does waiting cost?Run 30 years, then 25 with the same monthly amount. The five-year delay usually removes far more than five years of contributions, because the lost years are the most heavily compounded ones.
- Is this fee worth it?Compare fee drag at your current cost versus a low-cost alternative. If the difference exceeds six figures, the service being provided needs to justify six figures.
Limits, errors and borders of the standard advice
Critical reviewCompound interest is the most quoted concept in personal finance and the most misused. Every projection is a smooth curve, and nothing that produces real returns is smooth.
"Compound interest is the eighth wonder of the world — start early and you're set."
The claimTime in the market does most of the work, so early contributions dominate outcomes.
Where it breaksThe famous illustrations assume a constant positive return, which no growth asset delivers — real sequences include multi-year declines, and a smooth curve is not a conservative simplification but a materially different object. The examples are also nominal, so a large part of the impressive final figure is inflation rather than purchasing power. And the advice is often delivered to young people with no surplus income, for whom the actionable lesson is not "start early" but "you cannot yet", which the framing turns into guilt rather than information.
The borderThe underlying point is sound and important: early contributions have more time to compound, and delay is expensive. Always look at real, after-inflation figures, and treat any smooth projection as a rough scale rather than an expectation.
"Just assume the historical average return."
The claimLong-run market averages give a reasonable basis for projection.
Where it breaksAverages are drawn from the markets and periods that survived, quoted before fees, often before inflation and before tax, and applied as if returns arrived evenly. Compounding is multiplicative, so volatility itself reduces the realised growth rate below the arithmetic average — a point the standard formula silently omits. Small changes in the assumed rate also produce enormous differences over decades, which means the output carries far more apparent precision than the input justifies.
The borderRun a range, deduct fees and inflation explicitly, and treat the pessimistic case as the planning case. If a goal only works at the optimistic rate, it needs more contributions or more time, not a better assumption.
"Fees are small — a 1% charge barely matters."
The claimA one-per-cent fee is a minor cost relative to returns.
Where it breaksIt compounds against you exactly as returns compound for you, so over decades a percentage point can consume a very large share of the final real balance — the effect is far larger than the annual figure suggests, and it is charged on the whole balance rather than on gains. The framing also compares the fee to nominal returns rather than to real returns, which makes it look proportionally smaller than it is. Fee disclosures often exclude transaction costs and platform charges, so the true drag is higher than the headline.
The borderFees are worth paying for genuine value — advice that prevents a serious behavioural error can easily justify them. Judge every charge against real returns rather than nominal, and know the total cost including platform and transaction charges, not just the fund fee.
"The rule of 72 tells you when your money doubles."
The claimDividing 72 by the return rate gives the doubling period.
Where it breaksIt is a mental approximation that loses accuracy at higher rates and assumes a constant return, which is the same flaw as every other smooth projection. More importantly, doubling in nominal terms is not doubling in purchasing power — at a moderate inflation rate, a nominal doubling can represent a far smaller real gain, and the rule is almost always applied to nominal rates. It is a useful arithmetic trick that gets treated as a financial insight.
The borderFine for quick mental comparisons at modest rates. Apply it to the real rate — return minus inflation — if you want the answer to mean anything about future purchasing power.
This calculator is exactly the smooth deterministic model we have just criticised: it applies a constant rate and cannot represent volatility, sequence risk or tax. Use it for scale and comparison, not as a forecast, and always enter a real rather than nominal rate if the answer matters. Our insistence on pessimistic assumptions is also not free — it can discourage people from investing at all, which is a worse error than an optimistic projection.
Frequently asked questions
Does it assume monthly or annual compounding?
Monthly. Contributions are added at the end of each month and growth is applied monthly at one twelfth of the annual rate net of fees, which matches how most funds and platforms actually behave.
Why is my result lower than other calculators?
Because this one subtracts fees and shows an inflation-adjusted figure alongside the nominal one. Most calculators show gross nominal growth, which is a substantially more flattering and substantially less useful number.
Should I include employer contributions?
Yes — add them to the monthly figure. A match is an immediate, guaranteed return that dwarfs anything the market offers, and excluding it will make you undervalue the account. See the account comparison.
Is my data stored?
No. Every calculation runs in JavaScript in your browser. Nothing is transmitted, logged or saved to a server, and closing the tab discards everything.
Next step
Once you know the number, the decision moves to structure: which account wrapper holds it, what it is invested in, and how the allocation changes as the horizon shortens. Work through glide paths by decade next, then stress-test the withdrawal phase.
Model notes. Constant-rate deterministic projection. It does not model sequence-of-returns risk, taxation, or contribution limits. Educational use only.