How this calculator works
Lifetime earnings here means the pay you expect to receive between now and retirement. The calculation starts with today's salary, raises it by an assumed average increase each year, and adds the yearly figures. Because a salary increase and inflation both compound, the total is very sensitive to the gap between them: a 3% raise with 2.5% inflation is a small real gain, while a 3% raise with no inflation is a large one. The calculator therefore reports the total twice, once in future dollars and once deflated to today's money. The real figure is the one to compare with today's prices, and the nominal figure is the sum of the paycheques you would actually receive. The model assumes continuous employment at the same employer or in an equivalent role, no career breaks, no promotions beyond the assumed average increase, and no change in hours. It ignores bonuses, overtime, benefits and tax. Retirement age is treated as the last working year.
Formula
Salary in year k = S(1 + g)^k, with k starting at 0. Total earnings = S x ((1 + g)^n - 1) / g, or S x n when g is zero, where n is the number of years. Earnings in today's dollars = sum of S(1 + g)^k / (1 + inflation)^k, which is a geometric series with ratio (1 + g)/(1 + inflation). Average salary = total earnings / n. The final salary is S(1 + g)^(n-1).
Worked example
From age 25 to 65 is 40 working years. A $60,000 salary rising 3% a year totals $4,524,075.58 in future dollars. With 2.5% inflation, the same earnings are worth $2,643,058.06 in today's money, because the real increase is only about 0.49% a year. The average salary is $113,101.89 and the final-year salary is $190,021.62.
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Frequently asked questions
Does this include bonuses and overtime?
No. Only base salary is modelled. If bonuses are a regular part of your pay, add their average to the salary figure, or model them separately and add the totals.
Why are the future and today's totals so different?
Inflation erodes the value of future dollars. The nominal total adds the paycheques as they will be paid; the real total converts each one back to what it buys today. Over 40 years the gap is large even at modest inflation.
How sensitive is the result to the salary increase?
Very. At 3% growth the total is about $4.5 million; at 1% it is about $2.9 million; at 5% it is about $7.2 million. Small changes in the assumed growth rate compound into large differences over a career.
Should I use gross or net salary?
Gross salary, because the question is about earnings before deductions. Tax and pension contributions are not modelled, so the amount you keep will be lower.
What if I plan to work part time later?
Reduce the salary for those years or shorten the working period. The model assumes full-time work at a constant growth rate for the whole period.