Optionally considers inflation, taxes and fees.

How serious are you about investing?

If you are serious then, this investment calculator is for you. Sure, all investment tools published by other sites will tell you how much you'll have after "X" years assuming a "Y" rate of return. But when you use many of these other tools, they don't consider the impact of inflation, taxes or fees on your investment results.

What good is that?

**Not considering these factors is doing investment planning with your fingers crossed and hoping things turn out.** But like I say, my calculators are not toys. Give me the next few minutes, and whether you are investing for income or some future expense, after using this compound growth calculator, you'll finish with a greater insight into your future than you may ever have had. More below...»

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Click on "Help" for a concise explanation.

First, let's get you oriented to a few of the high-level features of this calculator. Don't be concerned with all the options. We'll discuss each one in the next few minutes.

The upper part of the calculator has two sections. We'll ignore the "Optional Settings" on the right for the time being. Leave those inputs set to zero. When the inputs are all zero, it makes no difference whether the other options are yes or no.

The section labeled "Investment Plan" is the core of the calculator with the first six inputs being the most important ones. If you understand these first six and how they relate, everything else will fall into place.

Notice the choice "Cash Flow Type."

The periodic additions to or withdrawal from the investment collectively is the cash flow. The setting "Cash Flow Type" controls whether the cash flow is an addition to the "Starting Amount" (investment (+)) or a withdrawal from the "Staring Amount" (income (-)). If you select "Income" then set "Starting Amount (PV)" greater than "Goal Amount." Set "Starting Amount" less than "Goal Amount" when you've set "Cash Flow Type" to "Investment."

Frequently one invests so as to have enough saved at some future date to generate an income stream. How much saving will you need to produce the income you desire? This calculator will tell you.

Investing for income is a two-step calculation that also happens to demonstrate the flexibility of this calculator.

Follow along, and I'll take you through the steps.

**How much should I have in my investment account when I need to depend on it for income?**

First, how much income do you want?

$3,000 a month.

How long should this income last?

25 years or 300 months.

Set "Cash Flow Type" to "Income."

Enter "Unknown" for "Starting Amount."

Enter 3,000 for "Periodic Withdrawal Amount" (or whatever future income you want).

Enter 300 for "Number of Cash Flows."

Enter an "Annual Rate of Return (ROR)" that is, the rate you think your investment will earn. For this example, we'll use 4.5%.

Set "Goal Amount (FV)" to 0.00. Why? Because we are withdrawing from the investment and we want the income to last for 300 months. When 300 months have passed, we'll have nothing left. Zip. Zero.

You can adjust the dates as needed, but for this example, I have both dates set to May 5th.

Leave the "Investment/Income Frequency" and "Compounding" set to "Monthly."

The calculator is now ready to answer the question, what starting amount do I need to have to receive the desired income for the planned number of months?

Click "Calc", and the answer is **$542,000.00** (rounded up) This is the number we need for step two.

**How much do I have to invest periodically to reach my goal?**

Change the "Cash Flow Type" to "Investment."

Set the "Starting Amount" to whatever the current balance is in your investment account(s). For this example, I'll assume that is 0, so enter 0.00.

Set the "Periodic Investment Amount" to "Unknown."

How much time is remaining before you want to start receiving the income?

Assume 30 years.

How frequently do you want to make additional investments?

Four times a year, or quarterly.

Therefore, for "Number of Cash Flows", enter 120 (4 times a year for 30 years). And set the "Investment/Income Frequency" to "Quarterly."

Set the "Annual Rate of Return" to a value with which you are comfortable. But, you might want to be a bit more aggressive than we were with the "Rate of Return" used in the first calculation. I'm going to use 6% for this example.

Set the "Goal Amount" to **$542,000**. (This is the result of the first calculation).

Set the two dates as needed. If you are following along, I'm leaving "Today's Date" set to May 5th. You can set the "First Cash Flow Date" to when you expect to start making contributions to the investment. If you want to tie the contributions to your pay period, set it to a pay day. I'm going to set it to June 1st.

Click "Calc." The result is $1,636.

Invest **$1,636** every quarter, and if you earn your anticipated rate of return, you'll end up with the required $542,00 after 30 years. Or enough money to give you the income you want.

You can verify the result by clicking on the "Schedule" button and checking the last balance amount.

Cool, right? And we didn't even have to change calculators.

What about the "Optional Settings"? How do they work?

Glad you asked.

No doubt if you have done even the most basic reading on investing, you have come across phrases similar to "examples shown do not reflect actual investment results."

A big part of the reason for this is because the investment tools used to create compound growth and investment income illustrations frequently do not consider the impact of taxes, inflation, and potential investment fees.

This calculator will take these important factors into account.

Here's how they work.

In the "Optional Settings" section, enter an average "Annual Inflation Rate." If you want to use a rate based on history, the Bureau of Labor Statistics publishes historical US Consumer Price Index data going back to 1914. If you average the CPI for those years, you'll find that in the US, Inflation has averaged 3.2% per year. (Checkout this Inflation Calculator. It will average the CPI for you for any range of years.)

If you enter an assumed inflation rate and set "Adjust Cash Flow for Inflation" to "Yes", then the income or investment cash flows will be adjusted on the first cash flow date after January 1.

The $1,636 quarterly investment from the above example, will have to be increased to a bit over $4,000 a quarter for your investment results to keep pace with inflation.

Even if you don't want to adjust the cash flow for inflation, you may still want to enter an assumed inflation rate. Notice the "Results" pane. If you set "Cash Flow Type" to "Investment", the calculator calculates two inflation-adjusted "Goal Amounts."

"Today's Value After Inflation" is what the goal value will be, expressed in today's dollars when adjusted for inflation. Having $542,000 in 30 years with a 3.2% inflation rate will be as if you had $211,000 today. The other inflation-adjusted result, "Inflation Adjust Goal Amount" is the amount you'll have to have in the future to buy what $542,000 buys today, or per our example, $1,390,000.00.

Notice, if you change the "Cash Flow Type" to "Income", the calculator calculates the inflation-adjusted value for the first "Periodic Withdrawal Amount." If you don't compensate for inflation, and assuming it averages 3% over 25 years, a $3,000 income will be equivalent to having a $1,300 income today, or you'll need to have $6,600 to have the same purchasing power that $3,000 has today.

Obviously, taxes can have a significant impact on your investing results if you pay the taxes due from your investment account. If you are paying taxes using investment funds, then enter your marginal tax rates as needed.

Generally, if an investment is not tax-free, then you would owe taxes on the realized gains. The calculator treats the investment gain (ROI) as realized, and the taxes get deducted on the first cash flow date after the first of each year.

There is an exception. Some investments allow the investor to defer the tax liability. A traditional IRA account comes to mind as such an investment. With these investment accounts, income taxes are calculated on the withdrawal, not on the investment gain.

If you want taxes calculated on the income, set "Taxes Calculated on Withdrawal" to "Yes."

Some investments require the investor to pay a fee. Fees get calculated in many ways, and no general purpose investment calculator can accurately handle all scenarios.

This calculator uses the percentage you enter and calculates the amount due using the year's average balance. The fee is deducted at the end of the year.

How does an investor compare investments and make a decision which investment is best? One consideration is the rate of return. The IRR is the gain an investment generates expressed as an annualized percentage.

You can use this calculation to compare investments. Notice there are two IRR calculations - one before the impact of taxes and fees, and the other after taxes and fees. (If your investment has an irregular cash flow, use this Internal Rate of Return Calculator to calculate the IRR.)

The user can quickly answer the following questions with this one calculator.

- What will be the future value of my investments?
- How long will my income last?
- How long will it take to reach my goal?
- What rate of return must I earn to reach my goal?
- What rate of return will create the income I need?
- What will be my income?
- How much do I have to invest to meet my goal?

The Investment Calculator is the newest calculator on this site, and I've not had the benefit of any user feedback. Please feel free to comment on how it or this documentation can be improved.

Investments that include regular cash flows can be described by five primary values or attributes. There are other details, but they play a secondary role to these five:

- Present value or starting amount
- Inflow or outflow amount - collectively the cash flow
- Term or number of cash flows
- Rate of Return (ROR) expressed as a percentage
- Future value or ending value (goal amount)

With this calculator, anyone of the five can be "Unknown." The calculator can solve for only one unknown at a time.

Three of the five can be zero, and there are rules for when zero is not appropriate

If the "Cash Flow Type" is set to "Income," the present value can't be zero. There is no money to invest that create the income.

If the "Cash Flow Type" is set to "Investment", the future value can't be zero. Who wants to add to an investment and end up with nothing?

Only one of the five can be zero at a time.

The rate of return and number of cash flows can't be zero.

Thus at least three inputs must be set to a value other than zero. One input may or may not be zero. And one input may be an "Unknown," but is not necessary to have an input set to "Unknown." Frequently, after solving, you may wish to change one of the options and then look at the schedule. The schedule updates whenever you click on the "Schedule" button. It is not necessary to click on "Calc."

Great calc. I ran some numbers including a 1% annual management fee. Was looking at a 20 year period. Year 19 did not include the fee. Thoughts?

Thank you, but I’m sorry that you have experienced a problem. I tried duplicating this, and I wasn’t able to do so. I assume you tried an investment cash flow (not an income cash flow). If so, I used all the defaults that the calculator loads with except I changed the "Number of Cash Flows" to 240 and set the fee to 1%. In that case, there was a fee shown for every year?

Can you take screen shots of your inputs and send them to me or post them here (you can select, copy and paste) and if I can duplicate the problem, I can fix it.

Anything not mentioned was inputted with a zero. Investment, $10,000. # of cf’s 20. ROR 6%. Dates, natural fill in – with that said, altering CFD changed fee results. Frequency/Compounding, Annually. Fee, 1%

Abeb, thank you for your nice simple example. I’m able to duplicate this bug now. The problem happens with all cash flow frequencies that are longer than a month. I usually update the code on the website over the weekend. I’ll try to have a fix in place for next weekend’s changes.

Abeb, I posted an update to the investment calculator this morning. The problem with missing the fee in the next to last year has been fixed.

There are a couple of other changes too. When fixing the fee issue, I realized I was calculating income tax due on the gross return and not after the fee was deducted. This is also fixed. Additionally, I changed the way income taxes are due at the end. Previously, income taxes were also deducted in the last year of the schedule for returns in that year. Now, the schedule has one additional year added to the end (beyond the number of years asked for by the user) to show the taxes that are due for the last year of investment gain. Not a big change but it keeps tax handling consistent for all years.

Also, the inflation adjustment now happens on the first cash flow date on or after any anniversary date of the first cash flow. Previously the adjustment had be done in January.

Thanks again for taking your time to report the bug.