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.
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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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