A 1% or 2% difference between two rates of return may seem insignificant at first glance. The reality is that this difference can have a major impact on the final value of your investment or retirement fund, especially over the long term. Keeping your money in a "no risk" investment may keep your money safe, but it may increase the risk of not having enough money to meet your retirement needs. With "safe" investments there is a risk of having a very low or even negative rate of return because of taxes and inflation. By including some investments with higher returns and longer term growth potential in your portfolio, you reduce the risk of an income shortage during retirement. Change the numbers in this calculator to see the dramatic impact of a higher rate of return. |

**Single Deposit Amount**: Enter the amount of your initial investment. If you are not investing anything yet, you can enter "0."

**Years of Growth**: Enter the number of years until you cash out your investment. Of course, in reality, you will more likely cash out your investment slowly, which will let you keep gaining income from it. But the purpose of this calculator is just to let you see how differences in interest rates affect differences in outcomes.

**Rate of Return 1**: Enter an annual rate of return, for instance, your current rate of return on your investment, as a percentage.

**Rate of Return 2**: Enter an annual rate of return, for instance, the rate of return on an investment you are considering, as a percentage.

**Regular Deposit Amount**: Enter the amount you will be depositing either each year or each month. If you will not be making any deposits after your initial investment, enter "o."

**Regular Deposit Type**: Enter whether you will make the deposit you listed above yearly or monthly.

**Make Deposits When?** Enter whether you will make the deposit you listed above at the beginning or end of the year/month.

The difference between a $100,000 investment at 5% annual return and a $100,000 investment at 5.5% is only $500 at the end of the first year. But imagine if you hold that investment for twenty years. The difference between 5% and 5.5% wouldn't just be 20 times $500, or $10,000. Thanks to compound interest, the difference would be $26,446. For a couple who house is already paid for, that might mean an entire year of retirement. In just ten more years, the difference between the two balloons to $66,201, or two and a half years' retirement. Ten more years later, the difference is now $147,332. There are many retirees who barely have that much saved alone.

Of course, you probably won't have $100,000 when you start investing. But a higher interest rate has just as dramatic an impact on investments that you build up year after year. If you start out with nothing and invest $10,000 each year, after 40 years the difference between a 5% interest rate and a 5.5% interest rate is $158,058. Just imagine how many years earlier you could retire with that $158,058.

Naturally, it's not wise to put all your investment in a single high-yield/high-risk investment. But by spreading your risk out, you can really see a huge difference. Plus, as you near retirement, you can move a larger part of your investment into lower-risk/lower-yield areas.