Understanding the difference between the future value of your money versus the present value of your money can be tricky. (Using a future value retirement calculator can make it easy though.) Once you get your head around the concepts they are pretty simple, and you’ll see why understanding this way of thinking about cash is so important to your future financial security.
NOTE: If any of this feels confusing to you, good news! The Boldin Retirement Planner automatically takes care of all future value calculations for you, giving you a realistic picture of your future finances.
What Is Future Value? What Is Present Value?
Future Value: Future value is the value of your money in the future after all growth and depreciation factors (inflation) have been accounted for.
Present Value: Present value is the value of your money today. It is also the opportunity cost of that money: its value comes from what it can be used for today, in addition to its intrinsic value.
A Simple Example
If you have $10 today, $10 is the present value of your money. In the future, the value of that $10 could be very different. The future value of your $10 will be dependent on growth rates, time frames as well as inflation.
- If you simply kept your $10 in your pocket, then your $10 might only be worth $7 in the future (depending on the inflation rate and how many years your money sits there).
- However, if you invested your $10, then the future value of your $10 could be higher. To calculate the future value, you would add your net returns (your rate of return minus the inflation rate compounded over time) to the $10.
The key difference between present value and future value is what you can do with that money now versus what you can do with it in the future. (This is the opportunity cost.) Your money now can be invested in something that may give you more opportunities in the future, like your house, business or stock portfolio.
But you may need to spend that money now on necessities because you have to take care of the present to ensure the future. This is why calculating present value (immediate needs) versus future value (projected future needs) is essential to creating your best budget.
Future Value Formulas
There are various formulas that you can use to determine the future value of your money.
Future Value Using Simple Interest
FV = PV*(1+(r * t))
where:
- t = number of years
- r = actual rate of return or interest (Your “actual rate of return” is your rate of return* minus the inflation rate**)
Future Value Using Compounded Annual Interest
FV = PV * (1 + r)^t
Present Value Formula
You might also need to calculate the present value of some future sum of money.
PV = FV/(1+r)^n
where:
- r = rate of return
- n = number of periods
Future Value Calculator for Your Retirement
There are lots of simple widgets that can calculate the future value of some current amount of money (and vice versa).
However, it can be more complicated to think about all of the different levers that go into your retirement planning and how all of that will get valued into the future. And most importantly, will it be enough.
Future Value Calculator: How the Boldin Retirement Planner Handles Future and Present Values
The Boldin Retirement Planner is the most robust retirement planner online.
Set Your Own Inflation and Rates of Returns
The Boldin Retirement Planner accounts for inflation and growth on all income, expenses and savings and assets, even allowing you to create different settings for:
- Rates of appreciation (or depreciation) on different kinds of assets
- Rates of return on savings and investments
- Inflation for general goods and services, healthcare, Social Security and more
- Social Security cost of living adjustments
- Optimistic and pessimistic values for all of these assumptions
This all increases the reliability of your projections.
Projections and Results – Future Dollars:
In the Boldin Retirement Planner, all of your future projections are shown in future dollars.
This can sometimes confuse people as the values – particularly for housing – can get really big in future dollars.
All of your assumptions are applied to all of your levers so you get a truly accurate picture of your financial profile in the future.
Your Inputs – Mostly Present Dollars
When you are entering your data into the Boldin Retirement Planner, most everything is entered in present values.
However, there are exceptions: any one-time activity that happens in the future is entered in future values. Examples of future one time events include future:
- Lump-sum expenses and contributions
- Annuity purchases and pension payouts
- Roth conversions
- Housing sales and purchases
NOTE: Ongoing contributions or distributions that will happen in the future are still entered in present dollars.
For example, if you think you’ll contribute $100 per month for 10 years then $200 per month, enter those values and the system will automatically inflation adjust those values so the $100 goes up to $102 in year 2, and in 10 years we start with ~$244 monthly contribution.
See what your future looks like with the Boldin Retirement Planner.
Conclusion: Future Value Calculator That Plans Real Life
A future value calculator turns guesses into grounded projections. You input contributions, rate of return, compounding frequency, and time horizon. Then you test inflation, fees, and taxes so growth projections stay realistic. Finally, you align results with Boldin’s Savings Playbook—match→emergency fund→tax-advantaged accounts→other investments—and confirm your savings trajectory in the Boldin Retirement Planner.
FAQs: Future Value Calculator and Retirement Planning
How do I choose a rate of return for a future value calculator?
Use conservative, diversified assumptions. Start with long-run returns for your mix, then subtract fees and a margin for uncertainty. Next, test lower returns to see downside risk. Validate contribution levels in the Boldin Retirement Planner. This keeps projections realistic while the Savings Playbook guides where each new dollar goes.
Should I include inflation in a future value calculator?
Yes. Inflation translates nominal growth into real purchasing power. Add an expected inflation rate or convert results into today’s dollars. Then check healthcare and housing assumptions. Finally, rerun scenarios in the Boldin Retirement Planner so spending goals match real dollars, not just nominal figures that can mislead decisions.
How do recurring contributions affect future value projections?
Recurring contributions drive compounding. Monthly deposits often outperform annual lump sums because money works sooner. However, cash flow matters. Therefore, pick a cadence you can keep. Map contributions to the Savings Playbook priorities, then check progress each quarter in the planner to ensure the trajectory still fits your goals.
What if my timeline changes—does the future value calculator still help?
Absolutely. Time is a powerful lever. A longer horizon magnifies compounding and softens volatility. A shorter horizon demands higher savings or lower risk. Re-run the calculator when work, health, or retirement age shifts. Then update the Boldin Retirement Planner so savings, risk, and withdrawal plans remain synchronized.
How does asset allocation influence a future value calculator?
Allocation sets expected return and volatility. More stocks may raise growth but increase drawdown risk. More bonds damp swings but slow compounding. For neutral basics on allocation, see the SEC’s overview of asset allocation. Then choose a mix in the planner that supports steady contributions and resilient withdrawals.
Can I link future value results to my withdrawal strategy later?
Yes. Project balances with the calculator. Then shift to withdrawal design. Coordinate taxable, pre-tax, and Roth flows to manage brackets and premiums. For a framework, review Boldin’s guide to ordering withdrawals. Finally, test guardrails and RMD timing inside the planner so growth translates into durable income.
Where do one-time windfalls fit into a future value calculator?
Enter windfalls as additional contributions on the date received. Then run two cases: invest immediately versus stage deposits over months. Compare outcomes after fees, taxes, and risk. Use the Savings Playbook to decide whether to boost emergency reserves first, then allocate the remainder and verify the impact in the planner.
