High-Yield Savings vs Index Fund Projection Calculator

Compare the growth of High-Yield Savings Accounts vs Index Funds over time. See after-tax, inflation-adjusted returns.

Starting amount to invest

Amount added each month

Current APY on high-yield savings (typically 3-5%)

Historical S&P 500 average ~10% (7-8% inflation-adjusted)

Annual fee (e.g., VTI/VOO ~0.03%)

Your marginal tax rate (affects HYSA interest)

For inflation-adjusted (real) returns

HYSA (After-Tax) = Initial(1 + r(1-t)/12)^n + PMT × [((1 + r(1-t)/12)^n - 1) / (r(1-t)/12)]. Index Fund = Initial(1 + r_e/12)^n + PMT × [((1 + r_e/12)^n - 1) / (r_e/12)], where r_e = return - expense ratio.
$10,000 initial + $500/month for 10 years: HYSA at 4.5% (22% tax) → $85,234. Index Fund at 8% (0.03% fee) → $105,678 pre-tax, $93,826 after-tax. Index wins by $8,592 after-tax.

What is the main difference between HYSA and Index Funds?

HYSA (High-Yield Savings Account) offers guaranteed returns with FDIC insurance, no risk to principal, but lower returns (3-5%). Index funds (S&P 500) offer higher potential returns (7-10% historically) but with market risk - values fluctuate. HYSA is for short-term goals (1-3 years), index funds for long-term (5+ years).

How are taxes different for HYSA vs Index Funds?

HYSA interest is taxed as ordinary income at your marginal tax rate (10-37%). Index fund gains are taxed as long-term capital gains (0%, 15%, or 20%) if held >1 year. In taxable accounts, index funds also generate taxable dividends annually. Use tax-advantaged accounts (401k, IRA) to minimize taxes on both.

What expense ratio should I expect for index funds?

Broad market index funds (VTI, VOO, SPY) have very low expense ratios: 0.01-0.05% annually. Target date funds have higher ratios (0.15-0.50%). Over 30 years, a 0.03% vs 0.50% expense ratio on $100k can cost $30,000+ in lost growth. Always choose low-cost funds.

Should I choose HYSA or Index Fund for my goal?

For goals <3 years: HYSA (preserves capital). For goals 3-5 years: Mix of both (60% HYSA, 40% index). For goals 5+ years: Index funds (80-100%, higher growth). Emergency funds: Always HYSA (need liquidity + safety). Retirement: Index funds in tax-advantaged accounts.