The future value calculator can be useful in some key basic personal finance computations. For example, you can determine an estimate of your savings several years into the future given a starting balance, a rate of return, compounding frequency, and additional periodic contributions.

**Instructions:**

Change the inputs in the fields above and click “Calculate” to get your results.

**Present Value:**

The lump sum amount with which you are starting. So if you want to find the future value of a beginning balance of 50,000, enter this amount as a negative. If none, enter zero. Present value should typically be entered as a negative if it represents an amount you will pay to invest, for example, in order to generate a future value.

**Annual Rate:**

This can be an average investment return on a portfolio, or an inflation rate, for example. The rate is adjusted automatically in the calculation when you choose the compounding frequency. For example, let’s say you enter 6% as the annual rate and “quarterly” for the compounding frequency. In this case, a periodic rate of 1.5% (6% / 4) will be used in the calculation.

**Number of Years:**

The time period or time horizon, stated in years, which you want to use in your calculation. Similar to the “annual rate” above, this number is automatically adjusted in the calculation based on the compounding frequency selected. For example, let’s say you are computing the future value of a stock reinvestment plan in 20 years. Choose quarterly compounding since most stocks pay dividends quarterly, and enter 20 for the number of years. But the compounding periods used in the calculator will be 80 (20 x 4).

**Periodic Payment:**

The amount of any payment *per compounding period*. Enter this number as a *negative* if you are *paying or investing* this amount. An example of this would be a contribution or payment to an investment account.

If you are receiving periodic payments, then you would enter this amount as a positive. An example of this would be a withdrawal or payment from a retirement account to you.

You can enter a present value (see above), periodic payments, or both.

*Make sure you match the periodic payment with the compounding frequency chosen.* For example, if you choose monthly compounding, the periodic payment will be the payment made each month. If you choose quarterly, it will be the total payments you make for each three month period, and so on.

**Type of Payment:**

This input only applies if there are periodic payments. The default value is “End of Period,” which implies payments are made at the end of each compounding period (“in arrears”). But you can also choose to calculate the result as if the payments are made at the beginning of each period (“in advance”).

**Compounding Frequency:**

The frequency with which returns and any periodic payments are added to the running balance on which the rate is applied. For example, with a bank savings account or money market account, the interest compounds monthly. A stock dividend reinvestment plan, on the other hand would compound quarterly since most common stocks pay dividends every three months.

#### Future Value Result:

Note that the future value given by the calculator can be positive or negative. If it is positive, it represents money or a positive balance you will have in the future. An example would be the balance in your investment account at some point in the future.

A negative amount represents a negative balance in your account or money you must provide in the future (based on the terms entered). An example would be an overdrawn balance in a bank account based on periodic withdrawals which have exceeded your original principal and earnings over the time horizon specified.

## Retirement Savings Example Using Future Value Tool

The future value calculator can be useful in helping you estimate how much you may be able to accumulate for your retirement, for example. Let’s say you currently have $100,000 (present value) in your retirement portfolio.

You are also able to save and invest an additional $3,000 (periodic payment) by the end of every three months (quarterly compounding frequency with end of period type of payments). And let’s say that you plan on doing this for the next twenty years.

Further, given your mix of stocks and bonds and historical returns, you estimate that you will be able to earn an 8% annual rate of return on your investments. Plugging these numbers into the future value calculator gives us a future value of $1,068,859.79.

### The inputs are as follows:

**present value:** -$100,000

**annual rate**: 8%

**number of years:** 20

**periodic payment:** -$3,000 (each quarter)

**type of payment:** end of period (default)

**compounding frequency:** Quarterly

## Future Value of Income

The future value calculator can also be used to estimate how much your income or expenses will be by retirement, for example. Let’s say your current annual income is $85,000. Also, you expect this income to increase by an annual rate of 3.5% each year for the next 25 years. How much will you be making in 25 years under these assumptions?

If you plug in the numbers above, you get $169,132.05

### The inputs are as follows:

**present value:** -$85,000 (enter as a negative since it is assumed you are investing this amount to generate the future value based on the rate of growth indicated)

**annual rate:** 3.5%

**number of years:** 25

**periodic payment:** 0 (not applicable in this example)

**type of payment:** end of period (default)

**compounding frequency:** Annual (default)

## Future Value of Expenses

You can perform the same type of calculation with expenses and inflation. Let’s assume your current living expenses are $60,000 per year. You are 45 and want to estimate how much these same expenses will cost when you retire at 65. Assuming a 3% average inflation rate, plugging in these numbers gives a result of $108,366.67. This is how much the living expenses will cost in twenty years based on the above assumptions.

### The inputs are as follows:

**present value:** -$65,000 (enter as a negative since it is assumed you are investing this amount to generate the future value based on the inflation rate indicated)

**annual rate:** 3%

**number of years:** 20

**periodic payment:** 0 (not applicable in this example)

**type of payment:** end of period (default)

**compounding frequency:** Annual (default)

You can use this same type of calculation to compute the future value of any number or amount given a specific growth rate.

## Conclusion

This calculator assumes fixed payments and rate input variables throughout the time horizon used. When predicting future savings goals and investment returns, for example, it does not allow for more flexible and detailed analysis.

More detailed inputs can be helpful. For example, your asset mix can change as you get closer to retirement (may affect investment rate of return). Or your savings may change based on income or other factors.

But greater detail can also provide a false sense of accuracy. The future is impossible to predict for many variables. For example, you don’t know exactly how much you will be able to save each year, or how much your investments will earn.

Nevertheless, you can use this tool to perform basic finance calculations in an efficient manner. Using estimated averages for the input variables can give you some useful ballpark figures.