Why a raise beats a bonus
Raises compound in two ways. First, you get the money every year for the rest of your career, not once. Second, in most jobs a raise lifts everything calculated on top of your salary: future percentage raises, employer pension contributions, sometimes overtime rates too. This tool ignores that second effect entirely, so if anything it understates what your raise is worth.
A one-off bonus does neither of those things. It arrives, it gets taxed, and it's gone. That's why a raise beats a bonus of the same size, and why it's usually worth negotiating harder for the salary number than the signing sweetener. The bonus buys a holiday; the raise quietly buys a retirement.
Worked example
Take the defaults: a $5,000 raise with 25 years of career left is $125,000 of extra earnings; saving half of it, $208.33 a month at 6%, grows to $144,373.74, which is more than the whole raise's face value. Add the half you spent along the way and the combined value comes to $206,873.74. Not bad for one slightly awkward conversation with your manager.
Frequently asked questions
Is a raise better than a bonus of the same size?
Usually, yes. A bonus is paid once. A raise repeats every year and compounds, because future raises and pension contributions are usually calculated on top of it. Over a career the same headline number is worth many times more as a raise.
Should I really save half a raise?
Saving any of it beats absorbing the whole thing into your lifestyle, which is what happens by default. Half is a good starting point because you never had the money, so you won't miss it, and you still feel a proper bump in your pay.
Does this account for tax?
No. The raise you're quoted is gross, but the money you can actually spend or save is after tax. Enter the after-tax amount for the honest version of the numbers.