Compound Interest Calculator

Simple interest pays only on your original principal; compound interest pays on principal plus every bit of interest already earned - growth on growth. Over one year the difference is trivial. Over 25 years it is the whole story: in this page’s example, contributions total $160,000 but the final balance exceeds $460,000. The extra $300,000 is compounding.

More frequent is better, but less than people assume: 7% compounded monthly yields an effective 7.23% annually, daily bumps it to about 7.25%. The gap between monthly and daily compounding on $100,000 is a few dollars a year. Contribution amount and time horizon dominate; compounding frequency is a rounding error by comparison.

Alone, about $40,000 (nominal) - money doubles roughly every decade at 7%. Add $500 monthly contributions and it becomes roughly $300,000, because the contributions themselves start compounding. Run both versions above with the contribution field at zero and $500 to see the split between "your money" and "your money’s money."

The S&P 500’s long-run average is near 10% before inflation, but planning at 6-8% is the sober convention - it leaves room for fees, bad timing, and decades that underperform. This calculator defaults to 7%. Whatever you choose, pair it with the inflation toggle so you are looking at purchasing power, not just a bigger number.

Because 25 years of even mild inflation quietly halves the dollar. At 2.5% inflation, this page’s $462,000 nominal result buys what about $249,000 buys today - still excellent, but a very different retirement. Most calculators skip this because the nominal number is more fun; we show both because only the real one pays bills.

A mental shortcut: divide 72 by your annual return to estimate doubling time. At 7%, money doubles about every 10.3 years; at 10%, roughly every 7.2. It also works in reverse for inflation - at 3% inflation, prices double (and cash halves) in about 24 years. Handy for sanity-checking any projection, including this one.

At 7%, five years is half a doubling - roughly 40% more final balance for the same monthly contribution. Change the years field from 20 to 25 and watch: the last five years add more growth than the first ten, because by then the balance doing the compounding is large. This asymmetry is why "start now, start small" beats "start big later."

Beginning-of-month contributions earn one extra month of growth each - about half a percent more final balance over long horizons. This calculator credits growth first and then adds the contribution (end-of-month convention), which is the slightly conservative choice. Automate the transfer for payday and you are effectively at the favorable end.

Depends on the account. In taxable accounts, interest and dividends are taxed the year received, which drags on compounding; in 401(k)s and IRAs growth compounds untaxed until withdrawal (or tax-free in Roth accounts). This calculator shows pre-tax growth - the account wrapper decides what survives, which is a strong argument for maxing tax-advantaged space first.

It raises your monthly contribution by a set percentage every year - typically matching expected raises. A 3% step-up on $500/month means $515 next year, $530 the year after. It feels invisible in any single month but adds six figures over long horizons in this example. If your 401(k) has an auto-escalation feature, this is exactly what it does.