Investment Growth Simulator (Compound Interest & Withdrawal)
Enter 3 of "initial investment," "monthly contribution," "assumed annual return," and "time horizon," and this tool solves for the remaining one under compound interest (dollar-cost averaging). See the split between total contributions and investment gains in a chart and a year-by-year breakdown table, then estimate a sustainable monthly withdrawal amount from that future value. To estimate the effect of a lump-sum mortgage prepayment, try the Mortgage Prepayment Comparison Calculator as well.
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Notes
- This is a simplified estimate that assumes the entered rate of return stays constant for the whole accumulation and withdrawal period. It does not guarantee future results, and real investments can lose value due to market fluctuations.
- The compound interest calculation assumes each monthly contribution is made at the start of the month and earns that month's return as well (an annuity-due). The initial investment is assumed to start earning returns from the very beginning of the period.
- For "time horizon," the required number of months is rounded up to the nearest whole month, so the resulting future value is slightly above (never below) your target.
- The withdrawal simulation assumes withdrawals happen at the end of each month, after that month's return is added. "Solve from a withdrawal period" computes the fixed monthly amount that brings the balance to exactly zero at the end of the chosen period (the same math as a fully amortizing loan payment); "fixed-amount withdrawal" computes how long a chosen fixed monthly amount lasts; "fixed-percentage withdrawal" withdraws a percentage of the balance each month, so the balance shrinks gradually but never mathematically reaches zero. Actual withdrawal timing, fees, and market fluctuations will change the real result.
- Taxes on investment gains (typically about 20.315% in Japan) and costs other than the rate of return, such as fund management fees, are not included. If you're using a tax-advantaged account such as NISA, this estimate is close to your take-home amount as far as taxes go (fees such as fund management costs still need to be deducted separately).
Glossary
Compound interest
Reinvesting investment gains back into the principal so that future returns are earned on those gains too, not just the original principal. Compared to simple interest (where only the original principal earns a return), this makes growth accelerate the longer the money stays invested.
Dollar-cost averaging (DCA)
Investing a fixed amount at regular intervals, such as monthly, rather than all at once. Because the fixed amount buys fewer shares when prices are high and more when prices are low, it tends to smooth out the average purchase price compared to a lump-sum investment.
Assumed annual return
The yearly rate of return assumed for the simulation, often based on the historical average of a stock index or similar benchmark. There is no guarantee that the same return will continue in the future.
Withdrawal (systematic withdrawal)
Periodically selling or withdrawing part of an invested balance, typically to cover living expenses, while the rest stays invested. Withdrawing the same amount every month is called a fixed-amount withdrawal. If withdrawals outpace investment gains, the balance gradually shrinks and is eventually depleted.
Fixed-percentage withdrawal
Instead of withdrawing a fixed amount, this withdraws a fixed percentage of the current balance each month or year. Because the withdrawal amount automatically shrinks along with the balance, the balance is less likely to be fully depleted than with a fixed-amount withdrawal — but the usable income gradually decreases over time.
NISA (Japan's tax-free investment account)
A Japanese account type where investment gains — capital gains and dividends — are exempt from tax up to certain contribution limits. Gains in an ordinary taxable account are normally taxed at about 20.315%. This tool's estimate does not subtract taxes, so in a taxable account your actual take-home gain would be lower.
FAQ
Does the result guarantee future returns?
No. It is a simplified estimate assuming the yield stays constant throughout. Real investments fluctuate and may lose principal.
Are taxes and fees included?
No. Taxes on gains (typically 20.315% in Japan) and fund fees are not reflected. If you use tax-free accounts such as NISA, the result is close to your take-home estimate as far as tax is concerned (costs still apply).
What happens when I choose which value to solve for?
Choose what to calculate (future value, monthly contribution, period, or initial investment) and enter the other conditions; the tool works it out with compound interest. When solving for the period, months are rounded up, so the result slightly exceeds your target.
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