Calculator · Stage 1

Cash Drag Calculator

Holding cash feels safe, but over long horizons it can quietly underperform an invested portfolio. This tool estimates that gap — the "cash drag" — after tax on cash interest and after inflation, so you can decide how much liquidity is worth paying for.

Educational tool only. Simplified model with constant assumed returns. The invested path is shown pre-tax and ignores taxes on investment gains, fees, and sequence-of-returns risk — so it likely overstates the realized gap. Holding cash for an emergency fund or a near-term goal is often rational.

Cash & Contributions

Current Cash Amount ($)

Monthly Contribution / DCA ($)

Added each month to both the cash and invested paths.

Time Horizon (years)

Return Assumptions

Expected Invested Return (% / yr)

Diversified portfolio assumption (pre-tax).

Cash Yield (% / yr)

HYSA / money-market rate.

Inflation (% / yr)

Tax

Marginal Tax Rate on Cash Interest (%)

Cash interest is taxed as ordinary income each year.

Ending Values

After — years, starting from —

Ending value if invested —

Ending value if kept in cash (pre-tax) —

After-tax cash value —

Opportunity cost (invested − after-tax cash) —

Inflation-adjusted difference (today's $) —

The Drag, in Rates

Expected invested return —

Cash yield (pre-tax) —

Cash yield after tax —

Annual cash drag (return gap) —

Assumptions & method

· All paths compound monthly over years × 12 months; a monthly rate is derived as (1 + annual)^(1/12) − 1.

· Future value = starting amount compounded, plus an end-of-month annuity of the monthly contribution.

· After-tax cash uses cash yield × (1 − tax rate); invested path is shown pre-tax.

· Inflation-adjusted difference = opportunity cost ÷ (1 + inflation)^years.

· State taxes, investment-gain taxes, fees, and sequence-of-returns risk are not modeled.

Cash Drag: The Hidden Cost of Waiting Too Long to Invest →

Tools

All calculators →