Compound Interest Calculator
See how regular contributions combined with compound interest can grow your wealth over time. Adjust your initial investment, monthly contributions, and expected returns.
Compound growth with periodic contributions
P is the starting principal, PMT is the periodic contribution, r is the annual rate (decimal), n is compounding periods per year, t is years. The first term grows the lump sum; the second grows an annuity stream of contributions.
- 01The annual return rate is constant for the entire horizon. Markets do not actually return a steady percentage; they cluster around a long-run average.
- 02Contributions are made at the end of each period (ordinary annuity). Contributing at the start gives slightly higher results.
- 03No taxes, fees, or expense ratios. In a tax-advantaged account those drop to near zero; in a taxable account they erode the headline return.
- 04Inflation is not netted out. A 7% nominal return at 3% inflation is closer to a 3.9% real return in purchasing power.
- 05Compounding frequency only affects the result modestly. Monthly compounding at 7% is ~7.23% effective annually; daily is ~7.25%.
- 01Real markets have sequence-of-returns risk. Two paths with the same average return but different ordering produce different ending balances when contributions and withdrawals happen mid-stream.
- 02The calculator does not model contribution increases (e.g., raising savings 3%/year). To approximate that, run multiple scenarios at higher contributions.
- 03Withdrawal phase is not modelled. For that, use the FIRE Calculator which adds a withdrawal-rate dimension.
- 04Output is nominal dollars. Use a real rate of return (nominal minus inflation) if you want today's purchasing power.
What rate of return should I use?
For broad US equities (S&P 500), a long-run nominal CAGR of roughly 9–10% has been observed since 1926, or about 6–7% real after inflation. Most planning calculators default to 6–8% nominal. Treat any single number as a planning input, not a prediction.
Does compounding frequency really matter?
Not much. The difference between annual and daily compounding on a 7% return is roughly 25 basis points (0.25 percentage points). Contribution amount and time in market dominate the result by orders of magnitude.
How do I compound a real return instead of a nominal one?
Subtract your assumed inflation rate from the nominal return. For example, 7% nominal − 3% inflation ≈ 3.9% real. Run the calculator with the real rate to see results in today's purchasing power.
What is the 'rule of 72'?
A quick mental shortcut: years to double ≈ 72 ÷ annual return %. At 8%, money doubles every ~9 years. At 12%, every ~6 years. It's an approximation of the compound interest formula and works well for rates between 4% and 15%.
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