Compound Interest Calculator
What a balance grows to with regular contributions and compounding.
How it works
Compounding means returns earning returns. The formula for a lump sum is A = P(1 + r/n)^(nt); regular contributions add a future-value-of-annuity term on top.
The interesting number is not the final balance but the split between what you contributed and what growth added. Over ten years contributions usually dominate. Over thirty, growth does. That crossover is the entire argument for starting early, and no later contribution rate fully compensates for missing it.
Common questions
What return should I assume?
Historically a broad global equity index has returned roughly 7% a year after inflation, but with decades-long stretches well below that. Model a pessimistic case too — the plan that only works at 10% is not a plan.
Does compounding frequency matter much?
Less than people expect. At 7%, moving from annual to daily compounding adds about a quarter of a percentage point. The rate and the years matter enormously; the frequency is a rounding error.