Future Value Investment Calculator

This calculator lets you make a side-by-side comparison of three different future value scenarios. Use this calculator to project the future value of your investments or retirement accounts. You can enter the existing value of an investment along with ongoing regular deposits, whether they are made monthly or annually. These periodic deposits can be increased each year to reflect inflation.

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Calculator Legend

Single Deposit Amount: Enter the amount of your initial investment. If you are not making a single initial investment, but will only be investing bit by bit at a steady rate, enter "0."
Return: Enter an annual rate of return as a percentage. What annual rate of return should you use if this is a variable rate (unlike, say, a CD)? You can either use your most recent annual rate of return or use the historical rate of return on the investment (which your investment manager should be able to tell you). Obviously, you should use the rate that is most likely to be accurate in the future. If you aren't sure which is more accurate, be conservative and use the lower rate.
Years: Enter the number of years until you cash out your investment. In reality, you may very well not cash out of your investment all at once like this, but rather take out your money slowly. But for the sake of comparing investments, it's much easier just to pretend that you will cash out all at once.
Periodic Deposit Amount: Enter the amount you will be depositing either each year or each month. If you will not deposit any more money after your initial single deposit, enter "o."
Indexed At: Enter the percentage at which you will increase your deposits. You may want to increase your deposit amounts in order to keep up with inflation, or increases in your income. Of course, it can be hard to decide in advance how much you will increase your deposits. Two percent is not a bad guess.
Type: Enter monthly or yearly depending on whether you will make the periodic deposit once a month or once a year.
When: Enter End or Beginning, depending on whether you will make the periodic deposit at the end or beginning of the month or year. Obviously, if you deposit at the beginning, your deposit will have that much longer to accrue interest.

Investments and Time: Factors in Growing Wealth

Over time, an investment will grow. The growth will ultimately depend on three factors:
  • The size of the initial investment
  • The interest rate or rate of return
  • The time the money is invested
In addition, if you add to the investment over time with new deposits, the amounts you deposit will of course also affect how much your investment will be worth.

Size of Initial Investment

It should come as no surprise that if you start out with more money, you'll end up with more money. The value of the extra initial amount will be magnified over time as interest compounds.

So, why bother comparing a smaller investment with a larger investment, if the larger investment will always be worth more (all else being equal)? The reason is that practically speaking, you may not be able to invest as much upfront as you would like. For instance, the high-return investment fund may not allow you to take out your money in an emergency. In that case, you would want to keep some of your money in an investment that you could tap into more easily. The ability to take your money out when you want is called "liquidity."

You can use the calculator to evaluate how much you will lose by lowering your initial investment.

Rate of Return or Interest Rate

Naturally, you want the best interest rate possible. But as with all investment issues, there is some give-and-take.

* A higher-return investment is often the riskier investment. For instance, stocks generally return better than bonds--yet they are also much more likely to go down in value. With a high-return stock investment you're risking losing money if the stock crashes suddenly.

* Some low-risk, higher-return investments have greater restrictions on whether and when you can take your money out--that is, they're less liquid.

You can use the calculator to evaluate whether the reward of higher return outweighs the risk of potential losses or less liquidity.

Length of the Investment

The longer your investment grows, the more money you'll have--it's that simple. Again, life sometimes intrudes and forces you to do something you'd rather not do, like cutting your investment short. For instance, having to care for a loved one full-time might incline you to retire early and start tapping into your investment. Or, you might simply want to retire early or use the investment money for a major purchase.

Use the calculator to compare different scenarios for ending your investment early or staying in for the long haul.