The "Silent Killer" of Wealth: Inflation
Most investment calculators show you a massive future number, but they fail to account for inflation. If inflation averages 2.5% (the historical norm), your money loses half its purchasing power every 28 years. This tool shows you the "Real Value" of your portfolio—what that money can actually buy in today's terms.
The Rule of 72
The Rule of 72 is a mental shortcut to estimate how long it takes to double your money. Divide 72 by your annual return rate. For example, at a 7% return, your money doubles every 10.2 years (72 / 7 = 10.2).
Frequently Asked Questions
What is the 'Real Value'?
Real Value adjusts your future money for inflation. If inflation averages 2.5%, $1 million in 20 years will only buy what ~$600,000 buys today. This calculator shows you that 'purchasing power' reality. Always use real value when planning for retirement or long-term goals to avoid a false sense of security from large nominal numbers.
How does compound interest work?
Compound interest is when you earn interest on your interest — it's exponential growth. In the early years, growth is slow. But after 10-15 years, the interest payments become larger than your monthly contributions. This is the 'hockey stick' curve. Einstein reportedly called it the 'eighth wonder of the world.' Starting 5 years earlier can result in 30-40% more money at retirement.
ETF vs Mutual Fund: Which is better?
ETFs (Exchange Traded Funds) typically have lower expense ratios (0.03-0.20% vs 0.50-1.50% for mutual funds) and are more tax-efficient due to their creation/redemption mechanism. For long-term growth, low-cost index ETFs like VTI or VOO are recommended by most financial experts. The expense ratio difference alone can cost you $100K+ over 30 years on a large portfolio.
What is dollar-cost averaging (DCA)?
Dollar-cost averaging means investing a fixed amount at regular intervals regardless of market conditions. When prices are high, you buy fewer shares; when prices are low, you buy more. This strategy reduces the impact of market volatility and removes the emotion from investing. Studies show DCA performs nearly as well as lump-sum investing 70% of the time, with significantly less risk.
Should I invest in a 401(k) or IRA first?
Always contribute enough to your 401(k) to get the full employer match — that's a guaranteed 50-100% return. After that, max out a Roth IRA ($7,000/year in 2024) for tax-free growth. Then return to your 401(k) to max it ($23,000/year in 2024). For high earners, consider a backdoor Roth IRA. The tax savings from these accounts can add $500K+ to your retirement over 30 years.