Compound Interest Calculator

Why compounding rewards time more than rate

Compound interest earns returns on previous returns, not just on the original amount, and that effect compounds itself — the gap between a plan started early and one started late widens every year, not just once. A modest rate held for twenty extra years typically outperforms a much higher rate held for half as long, which is the opposite of how most people intuitively weigh the two.

Contribution frequency matters less than people expect

Monthly versus annual contributions of the same total amount produce only a small difference in the final figure, because the extra compounding periods are working on small amounts for short stretches. What actually moves the outcome is the size of the contribution and the number of years it runs — frequency is a rounding error next to those two.

Nominal returns are not real returns

A projection built on a nominal interest rate ignores inflation, and inflation is not optional — it erodes purchasing power every year regardless of what the account statement shows. A rough rule is to subtract expected inflation from the nominal rate to get something closer to real growth in today's money. The number this calculator shows is nominal; treat it as an upper bound on what the money will actually buy later.

Fees compound exactly like returns do

A 1% annual fee sounds small next to a 7% return, but fees compound against you the same way growth compounds for you — over several decades that difference is not small at all. Two accounts with identical contributions and identical gross returns can diverge substantially in what actually lands in your pocket, purely on the fee layer sitting on top.

What this projection assumes, and where it breaks

This calculator assumes a constant rate of return every year, which no real investment provides — actual returns arrive as an uneven sequence of good years and bad ones. Two portfolios with the same average annual return can produce different final balances depending on the order those returns arrive in, an effect known as sequence risk. Treat the output as a clean illustration of the mechanism, not a forecast of any specific outcome.