Fees may look small over one year. Over decades, they reduce the balance that can keep earning returns. Inflation also changes what your future balance can buy. Here is a simple example of both effects.
Assume a $300 contribution at the end of each month, a constant average annual return of 5% or 7%, and annual fees subtracted from that return. These are before-tax projections, not forecasts.
| Assumed return | Annual fees | Estimated balance after 20 years | Fee impact |
|---|---|---|---|
| 5% | 0% | ≈ $123,300 | — |
| 5% | 0.5% | ≈ $116,400 | ≈ −$6,900 |
| 7% | 0% | ≈ $156,300 | — |
| 7% | 0.5% | ≈ $147,100 | ≈ −$9,200 |
Assumptions: no starting balance, 240 end-of-month contributions, monthly compounding using the annual return minus fees, and the same return every year. Before taxes and market variability. Rounded to the nearest hundred dollars.
At a 7% return and 0.5% fees, fixed $300 monthly contributions grow to about $147,100 after 20 years. If contributions rise by 2% each year to keep pace with inflation, you contribute about $87,500 in total and the projected balance reaches about $171,400. At 2% inflation, that is worth about $115,300 in today’s purchasing power.
Indexing contributions increases both the savings effort and the projected balance. To compare paths fairly, look at total contributions, future dollars and the inflation-adjusted value.
The simulator subtracts fees from the assumed return and can index contributions and withdrawals to inflation. Its Monte Carlo range illustrates possible outcomes; it is not a guarantee. The English simulator is before tax and does not model US or other countries’ tax rules, including home-sale taxes.
Change contributions, returns, fees and inflation, then compare the projected balance with its purchasing power today.
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