The Projection That Won't Happen
A calculator projects €500 a month at 7% for 25 years, producing about €405,000.
That figure is the outcome if 7% arrives every year, identically.
It won't. Real returns vary, and a sequence averaging 7% produces a range of outcomes rather than a point — which means the projection describes one scenario from a distribution the calculator doesn't show.
A single number invites confidence the calculation can't support.
Modelling a Range
The minimum honest version of a projection.
Run it at several rates:
Pessimistic: 4% → ~€259,000
Central: 7% → ~€405,000
Optimistic: 10% → ~€664,000
The spread is the answer, and it's wide — the optimistic figure is more than two and a half times the pessimistic one.
Which is uncomfortable and accurate. A plan robust at the pessimistic figure is a plan; one that only works at the optimistic figure is a hope.
Choosing the rates:
Base them on long-run historical returns for whatever you're modelling, net of fees, with the caveat that historical returns don't predict future ones.
Widen for shorter horizons. Over 30 years, returns have historically converged toward a long-run average; over 5 years they haven't.
Use real rates — net of inflation — and a target in today's money. A nominal projection over 25 years produces a number whose purchasing power is much lower than it appears.
The Compound Interest Calculator runs the projection:
- Enter the amount, rate and term.
- Read the result.
Run it three times. The range is more informative than any single run.
Where the Rate Comes From
A distinction worth being clear about.
For a guaranteed product — a fixed deposit, a bond held to maturity — the rate is known. The projection is arithmetic and the result is reliable, subject to the issuer's solvency.
For anything market-linked, the rate is your assumption. It isn't a forecast, it isn't a promise, and it isn't a property of the investment.
Which means the projection's precision is entirely false for market-linked investments. The calculator computes to the cent from an input that's a guess.
Presenting a market-linked projection to two decimal places is the specific error, and it's nearly universal in calculator output.
Round the output aggressively to match the input's precision. "Somewhere around €400,000" is honest; "€405,213.47" isn't.
Sensitivity: Which Input Matters Most
Testing which assumptions drive the outcome.
Vary one input at a time by a fixed proportion and observe the effect.
For €500/month over 25 years at 7%:
Baseline: ~€405,000
Contribution +10% (€550): ~€446,000 (+10%)
Rate +10% (7.7%): ~€445,000 (+10%)
Term +10% (27.5 years): ~€489,000 (+21%)
Term has the largest effect, because it compounds — additional years apply to a larger balance and for the full growth period.
Which is the practical finding: starting earlier or continuing longer moves the outcome more than optimising the rate, and it's the input most within your control.
The rate is the least controllable and receives the most attention.
Fees work in reverse, and their effect is also amplified by time:
7% gross, 0.2% fee → 6.8% net: ~€392,000
7% gross, 1.0% fee → 6.0% net: ~€346,000
7% gross, 2.0% fee → 5.0% net: ~€297,000
Nearly €100,000 between the lowest and highest fee on identical contributions.
Which makes fees a larger lever than most rate assumptions, and one that's knowable rather than assumed.
Modelling What Actually Happens
Refinements that make a projection resemble reality.
Contributions that increase. A fixed contribution over 25 years ignores income growth and inflation.
€500/month flat: ~€405,000
€500/month +3% annually: ~€546,000
€500/month +5% annually: ~€642,000
A substantial difference, and the increases are easier to sustain than a higher starting contribution because they arrive alongside income growth.
Contribution gaps. Life interrupts. Modelling a plan that assumes 300 consecutive monthly contributions is modelling an unusual life.
Test a scenario with six months of no contributions at some point, and see whether the plan still works.
Withdrawals. Many goals involve taking money out before the end — a house deposit, an emergency. A projection assuming nothing is withdrawn overstates.
Tax. Returns are generally taxable, with treatment varying by wrapper, by jurisdiction and by circumstance. A gross projection overstates the spendable result.
Rebalancing and drift. A portfolio's composition changes as components perform differently, which changes its expected return — an effect no single-rate projection captures.
The Real Rate
Working in today's money, which makes long projections interpretable.
real rate ≈ (1 + nominal) / (1 + inflation) − 1
The common approximation — nominal minus inflation — is close enough for most purposes at typical rates.
7% nominal, 3% inflation → about 3.9% real
Projecting at the real rate produces a figure in today's purchasing power:
€500/month, 25 years, 3.9% real: ~€250,000 in today's money
Compared to €405,000 nominal — the same outcome, expressed differently, and the real figure is the one that tells you what you could buy.
Set targets in today's money too. A goal of "€300,000" set today and projected nominally will buy substantially less than €300,000 buys now.
Which is the consistency requirement: real rate with a real target, or nominal rate with an inflated target. Mixing them produces an answer that's wrong in a direction that flatters.
Presenting a Projection Honestly
Guidance for anyone building or using one.
Show a range, not a point.
Round to match input precision. Two significant figures is usually appropriate for a long-horizon projection.
State the assumptions explicitly — rate, inflation, fees, contribution pattern.
Label whether it's real or nominal.
Note that the rate is an assumption, not a forecast or a guarantee.
Show the effect of fees as a separate line, since it's a knowable input that's frequently omitted.
Include a downside scenario, not just a central and an optimistic one.
Don't extrapolate past returns as though they predict future ones.
Point toward professional advice for anything consequential.
What a Projection Can't Do
Limits worth naming.
It can't predict returns. Nobody can.
It can't model sequence effects, which matter enormously once withdrawals begin.
It can't model your behaviour. The most common reason projections don't materialise is that the contributions stopped.
It can't account for your circumstances — tax position, other assets, risk tolerance, time horizon flexibility, or what happens if you need the money early.
It can't tell you whether an investment is suitable.
Which is where a qualified adviser comes in. A regulated adviser who knows your situation can assess suitability, which is a different question from what a calculator answers.
This article is general information, not financial advice. Investments carry risk including the risk of loss, past performance doesn't indicate future results, and decisions about your own money warrant professional guidance.
Practical Tips
Run the projection at three rates, and treat the range as the answer.
Work in real terms with a target in today's money.
Subtract fees from the rate before projecting.
Model increasing contributions, not flat ones.
Test a gap in contributions and see whether the plan survives.
Vary inputs one at a time to find which matters most.
Round the output to match the input's precision.
Recheck annually and adjust.
Get advice for anything consequential.
FAQ
Why shouldn't I trust a single projected figure? It's computed from an assumed rate that won't arrive every year identically. Running several rates produces a range, which is the honest answer.
Which input affects the outcome most? Time, because its effect compounds. A 10% longer term does more than a 10% higher rate or contribution.
How much do fees matter? Substantially over decades. The gap between a 0.2% and a 2% annual fee can approach a quarter of the final figure.
Should I project in real or nominal terms? Real, with a target in today's money. A nominal figure over decades overstates purchasing power.
How do I convert a nominal rate to a real one? Approximately, nominal minus inflation. More precisely, (1 + nominal) / (1 + inflation) − 1.
Can a projection tell me if an investment is suitable? No. Suitability depends on your circumstances, risk tolerance and other holdings — which is a question for a qualified adviser.
The Takeaway
A projection is arithmetic on an assumption, and presenting the result to the cent disguises how uncertain the input is. Running it at three rates, net of fees, in real terms, produces a range — and a plan that works at the low end of that range is a plan rather than a hope.
Model compound growth free with the Compound Interest Calculator at sadiqbd.com — no sign-up, instant results. This article is general information, not financial advice.
