Calculating Good and Bad Financial Scenarios

Calculating Good and Bad Financial Scenarios

I haven’t done many calculations around here lately and since we both know I am number-crunching incessently, I thought it was about time to do a number crunching exercise here on the blog with our numbers. Today, we’re going to look at 3 scenarios into the future: a terrible one, a low-return one, and a good return one. Let’s see how the numbers play out:

Where we Stand

These calculations are based on our portfolio’s current $150,000 value (a nice even number to work with, which is part of why we’re running the simulations now!). The monthly savings for the first year assume $2500 – the $1500 to max out Mr. T’s 401k (automatic) and a mix of employer contributions and my savings for another $1000/month. This is our current savings rate. Then, after the first year, those monthly savings amount skyrocket to $4500 because in 2019, we will start the year with a paid off house and we can throw our mortgage payment directly into savings! To make these calculations, I use my very favorite compound interest calculator to plug in the numbers.

The Recession Starts Tomorrow!

In this scenario, our entire portfolio takes a 25% hit before the end of the year and then grows at 3% forevermore. Let’s look at the numbers:

End of 2017: $112,500 – A 25% drop from today’s portfolio value.

End of 2018: $146,337 – $2500/month savings, 3% return

End of 2019: $205,536 – $4500/month savings, 3% return

Based on continuing at that same savings rate ($4500/month) with a solid 3% return, we would hit $1,000,000 by the end of 2031 ($1,073,303). So, in this terrible financial scenario, we would have to keep up our contributions (and thus work) for another 14 years. If we were going for $2,000,000 (just to throw in more numbers), we would have to tack on another ten years, so we could hit $2,000,000 by the end of 2041, or 24 more years.

Bogle’s 4% Return Prediction

Jack Bogle is predicting a 4% return from the stock market for the next decade. Let’s say he’s right (to be clear, I don’t think ANYONE can predict the future of the markets), but the 4% return last forever. In this scenario, the market doesn’t take an initial nosedive (though I’m conservatively estimating our portfolio at the end of 2017 to remain at $150,000), but instead, returns 4% forever. In this scenario:

End of 2017: $150,000

End of 2018: $186,667 – $2500/month savings, 4% return

End of 2019: $249,273 – $4500/month savings, 4% return

Based on continuing at that same savings rate ($4500/month) with a solid 4% return, we would hit $1,000,000 by the end of 2029 ($1,034,248) – 12 years away – just 2 years before the terrible recession followed by years of 3% returns! Again, to throw more numbers at you, we would hit $2,000,000 by the end of 2038.

Favorable Markets

Let’s go with 6% in this “good” market scenario. No big dip (though, again, for ease mainly, we’ll end 2017 with our current portfolio balance of $150,000.

End of 2017: $150,000

End of 2018: – $190,090 – $2500/month savings, 6% return

End of 2019: – $257,324 – $4500/month savings, 6% return

That extra 2% return shaves off a total of 1 year from the 4% scenario! At the end of 2028, we would have $1,083,306.

Bonkers Markets

Dave Ramsey says to count on a 12% market return. To be clear, I do NOT agree with him for your calculations, but for the experiment, let’s say HE’S the one that’s right (again, no one can predict the future of the market). With the same savings patterns, but a 12% return, the numbers look like this:

End of 2017: $150,000

End of 2018: – $200,730 – $2500/month savings, 6% return

End of 2019: – $283,258 – $4500/month savings, 6% return

Now the real question: Does TRIPLING market returns in my calculations cut the amount of time needed to work in half as one might hope? Not exactly. In this scenario, we reach millionaire status by the end of 2025 ($1,051,053), or just 4 years earlier than the 4% scenario. And $2,000,000 by the end of 2030.


  • Savings Amounts Count – Because we are saving a good amount of money consistently in each of these scenarios, that makes more of an impact on our portfolio than the scenario. The difference in the amount of years worked between the terrible recession scenario and the bonkers market scenario is only 6 years!
  • The Higher the Total, the More Return Counts – In the bonkers market scenario, we got to $1,000,000 just 4 years earlier than the 4% scenario. But we got to $2,000,000 8 years earlier! As our portfolio climbs, our monthly savings end up being less and less of a percentage of the whole. This means market returns start to impact the portfolio way more.
  • Our Future is Bright – None of these scenarios include any savings beyond what I mentioned. No raises. No potential for me to earn more money when all the kids are in school. They just assume our current savings amounts with mortgage payments added in at the end of 2019. In these very conservative parameters, we will hit $1,000,000 in the next 8-14 years. Regardless of what the market does for the next two decades, we’ve set ourselves up to be just fine and retire early. Even if we wait 15 years to retire, we will still be younger than 50 and that’s a full 15 years earlier than “traditional retirement.”
  • Riding the Wave is Important – I will re-emphasize that I firmly believe no one can predict the future of the market, and being able to time when to pull out and when to buy is impossible. These scenarios all assume we’re putting the same amount of money into the market no matter what. If we tried to pull out at any point, we would be worse off.

Bonus Scenario:

When will our investments hit 1 and 2 million without any contributions at all? Starting with our current $150,000 and assuming no further savings, here’s the breakdown:

At 3% Return – We would hit $1,000,000 in 2081 and $2,000,000 in 2104 (I really hope to be dead by then)

At 4% Return – $1,000,000 at 2065 and $2,000,000 by 2082 (just in time for us to turn 100!)

At 6% Return – $1,000,000 at 2049 (a reasonable 32 years away) and $2,000,000 by 2061.

At 8% Return – $1,000,000 by 2041 and $2,000,000 by 2050

At 12% Return – $1,000,000 by 2033 and $2,000,000 by 2039 (If Dave Ramsey is right, we can all retire early without saving anything at all!)

Stop Worrying about the Markets, and Keep Saving!


A Financial Plan is Like a Sneeze While Driving


Calculation Financial Scenarios: Roth IRA Edition


  1. Emily Jividen

    A good experiment, especially since you’re adding in the effect of future contributions versus no future contributions. Your future does look bright, Maggie.

    • MaggieBanks

      Calculations like these help prepare me mentally for the market to tank! 🙂

  2. bob r

    Clearly it is the chunky cash contributions you make that matter. One year out, you are adding over $50k to a pot of (roughly) $200k — a 25% gain. Ten years of that is adding over a half mil directly, regardless of the market. That is ALL good. But throw your 25% recession in at the year before you hit $1 million and you are down to $750k — a steeper hill to climb out of. (Or worse, you that that hit when you have already retired and you can’t add cash back in to make it up.) That’s why we all want to have more than we need and keep it in the market where the ups have always outweighed the downs, as long as you stay in it.

    • MaggieBanks

      Agreed. Contributions are a huge factor as the latest run-down proves. And yes, a 25% hit at the end would be much, much worse.

      • bob r

        Re-reading my bit, I sound like such a nay-sayer, and I’m not. I’m just looking at my own situation and seeing the need to also look at the non-rosy, possible problems. Even if the hit comes just before retiring, the worst that happens is a bit more time filling the bucket–and some great growth opportunities for that down-market buying. Here’s to success!

        • MaggieBanks

          Oh you’re good. Always good to plan for really bad scenarios. Then, when it’s better, you’re thrilled!

  3. Kim from Philadelphia

    Hi Maggie,
    I chuckled when I read this, because I was just wondering for how long the markets can hold out at the current return rate before things level or plunge.

    The advisor who manages our investments usually calls me to chat 2-3 times a year, just to “check in”
    He said, “you do know things have been unusually good and don’t be surprised if your rate of return dips”
    I told him that I totally know it’s the nature of the stock market, and reminded him (and myself) that I won’t panic.
    We’ll just use that time to take some cash set aside and buy stocks at lower cost !
    Always have to be positive!

    • MaggieBanks

      Oh I’m with you. It’s gonna tank! But, oh well. Keep on keepin’ on!

  4. Chris @ Keep Thrifty

    Awesome to see how all of the scenarios play out. Sounds like you guys are in great shape no matter what! I’m excited to see your “no more mortgage” post when you get there 🙂

  5. I was doing my own calculations this week using Bogle’s 4%. We have about 230k in retirement now and hopefully will be adding 2k/month to that starting this year. The calculators say we will be at 1.3 million by the time our youngest is done with college and I am 60. That is my conservative estimate, if we don’t increase income and don’t inherit anything. If we pay off our mortgage in 5 years and add the mortgage money to investments, we will hit 1.5 mill by the time I am 60. We’d have to come up with a full extra 2k/month on top of that to hit 2 mill.

    • MaggieBanks

      Woo hoo! It sounds like you’ve got a good start! Those numbers will start looking better as you get more in the investments… I look forward to that myself. 🙂

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