How the projection works
The model has two moving parts. Your starting balance compounds on its own, and each contribution compounds from the moment it is made. Contributions early in the period do far more work than late ones.
- P
- Starting amount
- PMT
- Contribution each period
- i
- Return per period
- N
- Total number of periods
This calculator simulates period by period rather than using the closed form, so contribution growth and fee drag are handled correctly.
You put in $175,000 and the market added $484,018 — 73% of the final figure is growth.
The three assumptions that decide everything
1. The return rate
This dominates the result and is the one nobody can know. The S&P 500 has averaged roughly 10% nominal and 7% after inflation over the long run, but any individual 25-year window has varied widely.
| Portfolio | Nominal | After inflation |
|---|---|---|
| 100% equities | 9% – 10% | 6% – 7% |
| 80/20 equity/bond | 8% – 9% | 5% – 6% |
| 60/40 balanced | 7% – 8% | 4% – 5% |
| 40/60 conservative | 6% – 7% | 3% – 4% |
| 100% bonds | 4% – 5% | 1% – 2% |
2. Inflation
A projection of $659,018 in 25 years is not $659,018 of today's buying power. At 2.5% inflation it is worth about $355,000 today. Always look at the real figure when planning against a real-world goal.
3. Fees
Fees compound against you exactly as returns compound for you, and they are the one variable entirely within your control.
| Annual fee | Final value | Cost of the fee |
|---|---|---|
| 0.03% (index fund) | $655,344 | $3,674 |
| 0.20% | $634,956 | $24,061 |
| 0.50% | $600,702 | $58,315 |
| 1.00% | $548,171 | $110,846 |
| 2.00% | $458,121 | $200,896 |
What a straight line hides
The chart above is smooth. Real portfolios are not. A constant 8% return has never happened; markets deliver 25% one year and −18% the next, and the average emerges only over decades.
This matters most near the end. Sequence-of-returns risk means a crash in the final years before you need the money does far more damage than the same crash early on, because it hits a much larger balance. This is why glide paths shift toward bonds as a goal approaches.
- Run the projection at 5% as well as 8% and plan against the lower figure.
- Look at the inflation-adjusted number, not the nominal one.
- Assume you will not contribute perfectly every month for 25 years.
- Shift toward lower-volatility assets in the last five to ten years before you need the money.
For a single lump sum with no contributions, use the compound interest calculator. For a retirement-specific projection with a withdrawal phase, the retirement calculator.
Frequently asked questions
What return rate should I assume?
For a diversified equity portfolio over 20 years or more, 7% to 8% nominal is a defensible planning figure. For a 60/40 balanced portfolio, 6% to 7%.
Run a pessimistic case too. If a plan only works at 10%, it is not a plan.
How much do fees really cost?
More than almost anyone expects, because they compound. On $25,000 plus $500 a month over 25 years at 8%, a 1% annual fee costs about $110,800 — more than half of everything you contributed.
This is the strongest argument for low-cost index funds, where expense ratios run 0.03% to 0.20%.
Should I invest a lump sum or spread it out?
Historically, lump-sum investing beats spreading it out roughly two thirds of the time, because markets rise more often than they fall and earlier money compounds longer.
Spreading it out reduces the risk of a badly-timed entry. If a large single entry would keep you awake, spreading it is the right call.
Why is the inflation-adjusted figure so much lower?
Because 2.5% inflation compounds too. Over 25 years it halves purchasing power. A projected $659,000 buys roughly what $355,000 buys today.
The real figure is the one to plan against, since your goals are priced in today's money.
How often should I revisit the projection?
Annually is plenty. Update the actual balance, adjust the contribution for any pay rise, and check whether the horizon has changed.
Recalculating after every market move encourages exactly the reactive behaviour that hurts long-term returns.