Assumes monthly compounding and a constant rate of return — real markets fluctuate year to year. This is a projection, not a guarantee.
What is a compound interest calculator?
A compound interest calculator projects what money grows into when the returns themselves start earning returns.
Simple interest pays only on your original deposit. Compound interest pays on your deposit plus everything it has already earned, which is why savings curves start slow and then steepen sharply. This calculator applies your rate monthly and adds your regular contribution, so you can see both the final balance and how much of it you never had to deposit.
It's the same maths behind retirement accounts, index funds, and high-yield savings — and the reason starting early tends to matter more than contributing more.
How compounding actually builds wealth
Compounding means your returns start earning returns. It's slow at first and then unreasonably fast — which is why time in the market matters more than the size of any single contribution.
You contribute
Your monthly deposit is added to the balance at the start of each month, before that month's growth is applied.
The balance grows
The whole balance — original money plus all prior growth — earns the monthly rate. Last year's gains are now earning too.
The curve steepens
Early on, most of your balance is money you deposited. Given enough years, most of it is growth you never worked for.
What the numbers look like in practice
The crossover point — where growth exceeds contributions — is the moment compounding starts doing the heavy lifting.
$5,000 to start, $300/month added, 7% annual return, 20 years:
More than half the final balance is money you never deposited. Extend the same plan to 30 years and growth roughly triples while contributions only rise by half.
The Rule of 72
A quick mental shortcut: divide 72 by your annual return to estimate how many years it takes money to double. At 7%, that's roughly 10 years. At 10%, about 7 years. At 3%, about 24. It's approximate, but it's accurate enough to sanity-check any projection in your head.
Starting ten years earlier is usually worth more than contributing twice as much. If you're choosing between "invest something now" and "wait until I can invest properly," the maths strongly favours starting.
Reading this projection honestly
Real markets don't return a smooth 7%
This model applies a constant rate every month. Actual markets deliver +20% years and −15% years in unpredictable order. Over long horizons the average tends to smooth out, but a bad sequence early in retirement can matter enormously — a phenomenon called sequence-of-returns risk.
Inflation quietly shrinks the result
$177,000 in twenty years will not buy what $177,000 buys today. If you want the answer in today's purchasing power, enter a real return instead — your expected return minus expected inflation. Historically that means using something closer to 4–5% rather than 7%.
Fees compound too
A 1% annual fund fee doesn't cost you 1% — it costs you 1% compounded across the entire horizon, which can consume a fifth or more of your final balance. If you're comparing funds, subtract the expense ratio from your assumed return and re-run this.
Common questions
The things people usually want to know before trusting a number like this.
What rate of return should I assume?
There's no correct answer, and anyone offering one confidently should be treated with suspicion. As reference points: broad stock market indices have historically averaged roughly 7–10% nominal over multi-decade periods, bonds considerably less, savings accounts less again. Past averages are not a promise about your particular time period. Many people model a conservative and an optimistic case rather than a single number.
Does compounding frequency matter much?
Less than most people assume. Moving from annual to monthly compounding at 7% changes the outcome by a fraction of a percent per year. The rate itself and the number of years dominate everything else. This calculator compounds monthly.
Should I include my employer's 401(k) match?
Yes — add it to your monthly contribution figure. A match is an immediate, guaranteed return on your money that no market return competes with. If your employer matches 50% of contributions up to some limit, that portion is effectively a 50% instant gain before any growth.
What about taxes on the growth?
This calculator shows pre-tax growth. In a tax-advantaged account (401(k), IRA, ISA depending on your country) growth compounds untaxed, which is roughly what's modelled here. In a regular taxable brokerage account you'll owe tax on dividends and realized gains along the way, so your effective return will be somewhat lower.
Is this suitable for planning my retirement?
It's a useful starting sketch, not a retirement plan. It doesn't model inflation, taxes, changing contribution levels, market volatility, or withdrawals. For decisions that actually matter, treat this as a way to build intuition and then talk to a qualified financial planner.
Guides on saving & investing
Plain-English explanations of the concepts behind this calculator.
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