Long Term Investing Calculator
Pre-set calculation modes
Pre-set calculation modes
How does the calculator works ?
Savings: Represent your total net worth today. You can include any assets that you think might be relevant to your estimation (like housing).
Income: Represent the amount you receive every year. In case of income and spending, it is assumed that income will grow on par with inflation.
Spending: Represent how much you spend every year in today's currency value. The amount will increase every year based on inflation.
Inflation: Estimated inflation in percentage that you can expect in your country. Note that depending your stages of life, or lifestyle, inflation can vary for each individual. I would recommend estimating your personal inflation.
Return: Estimated return on your investement in percentage. If you have lots of different assets returning different returns, try to average them out. Base assumption is the S&P average return over last 30 years: 9%. Don't forget to include taxes !
Years: Number of years to make the prediction on. If you expect to live to 100 years old, enter the number of years left until then.
Spending ratio: Represent the percentage of your savings that you are spending. As an example the F.I.R.E. movement recommends 4%
If it is showing a negative number, it means that you are earning enough money than you are spending.
Investment retun: Represent the Annual Percentage Yield of your investments you need to stay at equilibrium (meaning that your net worth stay stable).
If it is showing a negative number, it means that you are earning enough money to support your lifestyle through other means than investing.
Possible Yearly spendings: Represent the amount of money you could spend every year to stay at an equilibrium (meaning that your net worth stay stable).
If it is showing a negative number, it means that you need to make more money through income or choose different investments to keep your net worth.
View how much your savings are erroded by inflation over time.
View how the compounding effect of your investements grow your savings over time
Combine Investing and inflation to see the evolution of your real buying power.
See how making and spending money affects your savings
Calculate what APY you need with your investments to keep your buying power stable
Calculate how much you can spend every year based on your savings while keeping your net worth.
Combine everything to estimate your net worth through life.
- Fix your annual returns to find the maximum spendings possible to stay at equilibrium.
- Fix your spendings to see the return needed to stay at the equilibrium.
- Fix both your spendings and returns, to see how long you could sustain your current lifestyle (real or estimated).
Step by Step example
We will go together through an example of a 50 years old person wanting an early retirement.
Let's assume that we have $200 000 of savings.
We will have no income for the forseable future. Maybe in later years a small pension will come, but given the uncertainty, we will not assume any help from government.
Housing is a big part of spending. If we own a residency that will make a big difference, and could also be counted as part of our savings. For simplicity let's assume that we rent and that spendings are very limited at about $20 000 per year
Average inflation is supposed to be 2%, but on essentials it is definitely more than that. We calculated our personal rate of inflation and it came up as 3%.
We are invested in the S&P, and expect an average return of 9.5% per year.
At 50 years old, a normal assumption would be to reach 90.
Set up of parameters is complete, let's now look at the results
The spending ratio show us that we are spending 10% of your savings every year. That is a lot !
The "Investment return needed" shows how much our investments need to return every year if we wanted to spend this much. Here it's about 14.44% per year. Not unrealistic but you need to chose your investments carefully.
The "Possible spending" shows how much you could spend every year to keep the same buying power. In this case our investement do return some money, but it is less than $12000 per year.
If we keep this way of life (same investements and spendings), we can see in the graph which year we will have no money left. It will be 14 years from now. That is before our projected years.
Let's change something and assume that pension will come and will be about $7500 per year.
Great ! We are still slightly under equilibrium, but we will still have money in 40 years !
Now update the parameters with your assumptions to adjust how you should invest, spend, or change jobs to meet your life goals.
Amount of Savings
Your inflation in percent
Investment interest rate in percent
Spending ratio in percent (spent/total savings)
Investment return in percent needed for equilibrium
Possible yearly spending to stay at equilibrium