Isolate one change
Start with $1,000, no contributions and an assumed 10% effective annual return. Compare two years with no fees against a 1% fee deducted from the balance after growth each year. This deliberately short example makes every charge visible without relying on a large projection.
The no-fee path grows to $1,100 after year one and $1,210 after year two. The fee path first grows to $1,100, deducts $11, and closes year one at $1,089. In year two, that balance grows to $1,197.90 before a $11.979 fee. Its ending balance is $1,185.921.
Compare the two effects
| Measure | Amount |
|---|---|
| No-fee terminal balance | $1,210.00 |
| Balance after modeled fees | $1,185.92 |
| Fees actually deducted | $22.98 |
| Terminal fee drag | $24.08 |
Fee drag is the difference between the two ending balances: $24.079 before rounding. Actual fees sum to $22.979. The additional $1.10 is the second-year growth the first $11 fee no longer earns. It is not a second charge from the provider; it is a difference in the compounding path.
Keep the fee convention visible
This example assesses a balance fee after each full year’s growth. A charge on opening balance, a monthly fee or a fixed currency charge produces a different schedule. Fees expressed as percentages of returns are also different from percentages of assets. A single number called “fees” is insufficient unless its basis and timing are stated.
The website’s monthly scenario model converts an annual balance fee into a period retention factor. The year-end example here is explicitly annual. Compare models with the same assessment convention before expecting exact agreement in a cash-flow scenario.
Explore without changing the question
Use the investment comparison calculator to hold starting principal and monthly deposits constant across scenarios. Each scenario includes its own matched no-fee calculation, so the fee-drag measure isolates the fee assumption.
A lower fee is only one input. This calculation does not evaluate an asset’s risk, suitability, tax effects or return reliability. It explains how a specified fee affects a specified growth model.