Compound Interest Calculator
Project what regular investing could grow into, then see the same figure in today's money — because a large number thirty years out is the easiest way to mislead yourself. The calculator also models the two quiet drags that most projections ignore: fees and tax.
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EstimateThis calculator provides estimates for educational and informational purposes only. It does not constitute financial, investment, legal, accounting, or tax advice. Results are based on the assumptions and information entered and may differ materially from actual outcomes. Tax rules and financial regulations can change. Consult an appropriately qualified professional for advice specific to your situation.
This applies a constant return every month. Real markets do not behave that way, and the order in which returns arrive changes outcomes — particularly once you begin withdrawing.
- Separates what you contributed from what the market added, year by year.
- Shows the inflation-adjusted value alongside the nominal one, not buried in a footnote.
- Models expense ratios and tax drag, both of which compound against you.
- Includes a sensitivity table, because a single point estimate of a 25-year return is false precision.
The mathematics of compounding
Compounding means earning returns on returns. A lump sum grows by:
FV = PV × (1 + i)^n FV = future value PV = present value i = periodic rate n = number of periods
Regular contributions add a second term — the future value of an ordinary annuity:
FV = PV × (1 + i)^n + C × [ ((1 + i)^n − 1) ÷ i ] C = contribution each period
This calculator works monthly, applying one twelfth of the annual rate each month with contributions at month end. That is a reasonable model of a monthly investment plan and slightly more conservative than assuming contributions arrive at the start of each month.
The key property is that growth is back-loaded. Consider $500 a month at 7% for 30 years:
| Period | Contributed in the period | Growth in the period |
|---|---|---|
| Years 1–10 | $60,000 | ~$26,000 |
| Years 11–20 | $60,000 | ~$113,000 |
| Years 21–30 | $60,000 | ~$291,000 |
The same $60,000 of contributions in the final decade is accompanied by more than eleven times the growth of the first. Nothing changed about the contributions or the return — only the size of the balance the return is applied to. This is why starting earlier matters more than contributing more later, and why the last years of a long plan feel disproportionately productive.
Why the inflation-adjusted number is the honest one
A projection of $610,000 in 30 years is a real number, but it is not a number in units you understand, because the dollar in 30 years is not the dollar you use today.
real value = nominal value ÷ (1 + inflation)^years
At 2.5% inflation, $610,000 in 30 years buys what about $291,000 buys today. That is less than half. The money has not been lost — prices have risen — but any plan built on the nominal figure is planning with the wrong number.
This is why the calculator shows both figures with equal prominence, and why the real-value line appears on the chart rather than in a footnote. When you are deciding whether a retirement projection is enough, the question is what it buys, not what it says.
A note on the return you enter: if you use a nominal expected return, use a nominal inflation figure and read the real value. If you prefer, you can enter a real return directly — historically around 4%–7% for a diversified stock portfolio, depending heavily on the period measured — and set inflation to zero, in which case the nominal and real figures will be the same and both will be in today's money.
Fees and tax drag: small percentages, large amounts
A 1% annual fee does not cost 1% of your outcome. It compounds against you for the whole period.
On $500 a month for 30 years at 7%:
| Annual fee | Ending balance | Cost of the fee |
|---|---|---|
| 0.05% | ~$606,000 | — |
| 0.50% | ~$558,000 | ~$48,000 |
| 1.00% | ~$510,000 | ~$96,000 |
| 2.00% | ~$429,000 | ~$177,000 |
The difference between a 0.05% index fund and a 1% actively managed fund, on this plan, is roughly $96,000 — about 53% of everything contributed. Fees are also the one variable in this entire calculation you can control with certainty.
Tax drag is the equivalent effect in a taxable account: tax paid each year on dividends, interest and realised gains reduces the amount left to compound. It is expressed here as the share of each year's return lost to tax. Inside a 401(k), IRA or similar it is zero; in a taxable account it commonly runs somewhere in the 10%–25% range depending on portfolio turnover, the mix of qualified and ordinary income, and your own rates. This is the mechanism behind the general advice to fill tax-advantaged accounts first.
What return should you assume?
This is the question the whole projection hangs on, and it deserves an honest answer: nobody knows.
Long-run historical returns for broad US stock indices have been substantially positive in nominal terms, but the figure you get depends heavily on the period you measure, whether you use nominal or real returns, and whether you include dividends. Bonds have behaved very differently from stocks, and a portfolio's expected return depends on its mix. Sequences matter too: the same average return arriving in a different order produces a different outcome once contributions or withdrawals are involved.
Rather than defending a single number, use the sensitivity table in your results. It runs the same plan at four different returns. If your plan works at the pessimistic figure, it is robust. If it only works at the optimistic one, you are relying on an assumption rather than a plan.
A reasonable practice for long-horizon planning is to assume less than you hope for and be pleasantly surprised, rather than the reverse — because the cost of an over-optimistic assumption is discovered too late to fix.
Turning the projection into a plan
Automate the contribution. Money that moves on payday, before you see it, is contributed far more reliably than money that requires a decision each month.
Raise it with your pay. The annual contribution increase field under Advanced models this, and its effect over decades is large. Raising contributions by 3% a year on a 30-year plan adds substantially to the outcome without ever feeling like a cut.
Fill tax-advantaged accounts first. Employer matching first of all, since a 50% match is an immediate return no market assumption can compete with, then tax-advantaged space, then taxable.
Do not confuse this with an emergency fund. Money that might be needed within a few years does not belong in a projection like this one. The Emergency Fund calculator covers that separately.
Leave it alone. The single most common way real investors underperform their own projections is by reacting to falls. The projection assumes you keep contributing through them.
Common mistakes
Using an optimistic return and treating the output as a plan. A projection is a conditional statement, not a forecast.
Ignoring inflation. The most common way a projection flatters itself.
Ignoring fees. The second most common, and the most fixable.
Assuming constant contributions for decades. Careers have interruptions. A projection with no gaps is an optimistic one.
Treating the ending number as spendable. In a traditional retirement account, withdrawals are taxed as ordinary income. The Roth vs. Traditional calculator compares after-tax outcomes properly.
Frequently asked questions
Earning returns on your returns as well as on your original money. If $1,000 earns 7%, you have $1,070 after a year. The second year earns 7% on $1,070 rather than on $1,000. Over a long period this accelerates dramatically — which is why the growth in the final decade of a 30-year plan dwarfs the growth in the first.
There is no single right answer, and anyone who gives you one with confidence is guessing. Rather than choosing one number, use the sensitivity table in your results to see the range. If your plan only works at the optimistic figure, it is worth adjusting the plan rather than the assumption. For long horizons, assuming less than you hope for is the safer error.
For a portfolio of stocks and funds, compounding frequency is not really a meaningful parameter — value changes continuously and dividends are reinvested when paid. The distinction matters for savings accounts and CDs, where daily compounding produces slightly more than monthly at the same nominal rate. This calculator compounds monthly, which is a reasonable model for a monthly investment plan.
Historically, investing a lump sum immediately has more often produced a better result than spreading it out, simply because markets have risen more often than they have fallen and time in the market is what compounds. Spreading it reduces the risk of investing everything just before a fall, which is a real risk and a real anxiety. The choice is between a slightly better expected outcome and a smoother experience — both are defensible.
That depends on your horizon and return assumption, which is what the Millionaire Milestone calculator works out directly. It also shows what $1 million would actually buy by the time you got there, which is usually the more important number.
Only through the tax drag setting, which reduces the annual return by the share you specify. Set it to zero for a tax-advantaged account. For a taxable account, a figure somewhere in the 10%–25% range is common, depending on how much of your return comes from dividends versus unrealised gains and on your own tax rates. The final withdrawal tax on a traditional retirement account is not modelled here — the Roth vs. Traditional calculator handles that comparison.