Expense ratio fee calculator: watch a 'tiny' percentage eat a house

By Tom, CPA · Updated October 25, 2026

TL;DR: Enter a starting balance, contributions, years, an assumed return and two annual cost percentages. The calculator compounds each scenario and shows the gap. In the default example, a 1% annual cost versus 0.05% on $500,000 over 30 years at 7% costs about $934,000 in ending wealth. Fees compound just like returns, only in the wrong direction.

Educational only, not tax, legal, or investment advice. Examples are illustrations, not predictions. Rules and limits change; verify current figures and talk to a qualified professional about your situation.

A 1% fee sounds like a rounding error. Lavish Larry calls it "one measly percent." Frugal Fran calls it a percentage of her entire net worth, charged every year, forever, whether the market goes up or down. The SEC's investor bulletin makes the same point with less sarcasm: small differences in fees can mean large differences in returns over time.

Use this calculator to price any annual percentage cost: a fund's expense ratio, an assets-under-management advisory fee, or both added together. Background reading: index fund comparison and index fund investing for FIRE.

CPA Warning Label: This uses a constant return that real markets won't deliver. Check each fund's current prospectus for its actual expense ratio, and remember that taxes, trading costs and advisory fees can stack on top.

Inputs

• Starting balance: what you have invested today.
• Annual contribution: added at the end of each year. Use 0 to see the effect on a lump sum alone.
• Years invested: 1 to 80. A FIRE timeline usually includes decades of retirement too, since fees don't retire when you do.
• Annual return before fees: your assumed gross return. Keep it modest, perhaps a real return of 4–5% if you think in today’s dollars. The point is the comparison, not the forecast.
• Fund A and Fund B costs: total annual cost as a percentage of assets. To model an advisor, add the advisory fee to the fund expense ratio, so 1% AUM plus a 0.20% fund equals 1.20%.

Projected cost

Each year the balance grows by the return and then shrinks by the fee: balance × (1 + return) × (1 - fee), plus the contribution. The calculator runs this three times, with zero fees, Fund A's fee and Fund B's fee.

Total cost of fees is the zero-fee ending value minus the ending value with fees. That includes the fee dollars and all the growth those dollars would have earned. It's why the total is much bigger than "1% × balance × years." Share of ending wealth lost expresses Fund A's cost as a percentage of the zero-fee outcome.

Comparison mode

The Fund B advantage output is the gap between the two ending balances. Typical comparisons:

A higher fee isn't automatically wrong. Advice that stops you from panic-selling, or plans a big tax move, can earn its cost. But the fee is certain, and the benefit has to be bigger than this number. See financial advisor fees and why expense ratios matter.

Assumptions

• A constant annual return. Real returns vary, but with a fixed percentage fee the drag is roughly similar either way.
• Fees are charged once a year at the end. Real funds deduct expenses daily from the fund's net asset value, which gives nearly the same result. The difference is too small to change any decision.
• No taxes, loads, trading costs or account fees. Funds with higher turnover can also have hidden trading costs that aren't in the expense ratio.
• Results are in nominal dollars. Assume a real (after-inflation) return if you want today's dollars.

Example

Illustration: Fran has $500,000 invested for 30 years at an assumed 7% before fees, with no new contributions.

• Zero fees: $3,806,128
• At 0.05% a year: $3,749,448, a fee cost of about $56,700
• At 1% a year: $2,815,394, a fee cost of about $990,700, or 26.03% of the zero-fee result
• Fund B advantage: $934,054

Illustration 2: Larry starts from zero and invests $20,000 a year for 25 years at 7%. At 1% he ends with $1,086,534. At 0.05% he ends with $1,255,307, a $168,773 difference.

Next, check how a smaller balance changes your withdrawals with the guardrails withdrawal calculator. If you're weighing a rental instead of funds, run the rental math too.