Investments Calculator
Purpose
We discussed investing in various articles:
Understanding Investment Types,
The Power of Compounding,
Age-appropriate Investing, etc. The investment calculator
here helps in estimating how to allocate our funds.
We use this to see how our different investments can grow over time.
It supports:
- multiple investments;
- fixed income investments (example: rental properties) and variable income investments;
- control how much of an investment can be withdrawn for expenses (including "none of it");
- time periods when an investment is available for withdrawal;
- the order in which investments can be withdrawn from.
Here are a few ways this calculator can be used:
- deciding how to allocate funds;
- learning how investments grow over time. To just see how the investments grow without factoring in expenses, set 'Annual expense' to 0. Similarly, to see the pre-tax investment gains, set 'Annual tax rate' to 0;
- seeing how the gains from investments can be used for expenses;
- creating what-if investment scenarios to understand investment options.
Limitations
- The calculations are approximate, and are mainly meant to give a quick estimate of the various possibilities.
- Taxation is conservative and errs on the side of caution. For
example, if an investment is taxable, all withdrawals in a year
are considered taxable, even the portion that comes from the
principal.
Disclaimer
Use this calculator only as a way to get a feel for
how investments can grow. As each person's
financial status and needs are different, please discuss with your
financial advisor and tax consultant before investing.
Our annual expense. To simply see how your investments will grow (i.e., without any expenses), set the annual expense to 0.
The annual tax rate for any investment gains. (Investments are described in the section below.)
Indicates the order we want to withdraw money from our investment gains for our expenses. "Growth" order starts withdrawing from highest growing investment first; "Available" starts with the fund that has the highest available amount; "Custom" order allows each investment below to specify its withdrawal order.
End the report when we reach a year where the investments are not sufficient to cover the expenses. If you know that investments will continue to grow and catch up with the expenses in a future year, uncheck this option.
Name of the investment / income source.
The principal dollar amount invested. For fixed income investments, this can be 0.
Does this investment generate a fixed income (e.g., rent) instead of a percentage of the investment?
The before-tax dollar value (for a fixed income investment) or percent return (for others).
Additional amount added to this investment every year.
Year starting from which the additional amount is added to this investment. Years start from 1.
Last year the additional amount is added to this investment. Years start from 1.
Year when we start withdrawing from this investment (for our expenses). If there is no restriction, or if you won't be withdrawing from this investment, leave blank. Years start from 1.
Year when we stop withdrawing from this investment (for our expenses). If there is no restriction, or if you won't be withdrawing from this investment, leave blank. Years start from 1.
Are withdrawals from this investment taxable? (E.g., returns from government-qualified investments and some municipal bonds may be exempt from tax.)
What is the maximum percentage of this investment that we can withdraw per year? Set to 0 if you won't be withdrawing from this investment (e.g., this is an emergency fund).
If withdrawal order type was specified as "Custom" above, when should we withdraw from this investment? This is a number, starting from 1 for the first investment to withdraw from, and so on.
