No. 05 — Data & Tools
Compound interest calculator
Enter a starting amount, a monthly contribution, a rate, and a number of years. The calculator returns the ending balance and the part most tools bury: how much of it you deposited, and how much the money earned on its own.
| Year | Deposits to date | Interest to date | Balance |
|---|---|---|---|
| 1 | $16,000 | $919 | $16,919 |
| 2 | $22,000 | $2,339 | $24,339 |
| 3 | $28,000 | $4,294 | $32,294 |
| 4 | $34,000 | $6,825 | $40,825 |
| 5 | $40,000 | $9,973 | $49,973 |
| 6 | $46,000 | $13,782 | $59,782 |
| 7 | $52,000 | $18,299 | $70,299 |
| 8 | $58,000 | $23,578 | $81,578 |
| 9 | $64,000 | $29,671 | $93,671 |
| 10 | $70,000 | $36,639 | $106,639 |
| 11 | $76,000 | $44,544 | $120,544 |
| 12 | $82,000 | $53,455 | $135,455 |
| 13 | $88,000 | $63,443 | $151,443 |
| 14 | $94,000 | $74,587 | $168,587 |
| 15 | $100,000 | $86,971 | $186,971 |
| 16 | $106,000 | $100,683 | $206,683 |
| 17 | $112,000 | $115,820 | $227,820 |
| 18 | $118,000 | $132,486 | $250,486 |
| 19 | $124,000 | $150,790 | $274,790 |
| 20 | $130,000 | $170,851 | $300,851 |
| 21 | $136,000 | $192,796 | $328,796 |
| 22 | $142,000 | $216,760 | $358,760 |
| 23 | $148,000 | $242,892 | $390,892 |
| 24 | $154,000 | $271,345 | $425,345 |
| 25 | $160,000 | $302,290 | $462,290 |
| 26 | $166,000 | $335,905 | $501,905 |
| 27 | $172,000 | $372,384 | $544,384 |
| 28 | $178,000 | $411,934 | $589,934 |
| 29 | $184,000 | $454,777 | $638,777 |
| 30 | $190,000 | $501,150 | $691,150 |
What the calculator is doing
One line of arithmetic, repeated twelve times a year. The balance grows by the monthly rate — your annual rate divided by 12 — and then the contribution is added at the end of the month. Written out: FV = P × (1 + r)^n + PMT × ((1 + r)^n − 1) ÷ r, where r is the monthly rate and n is the number of months.
Two details are worth knowing because they move the answer. Contributions land at month-end rather than month-start, which is the conservative convention: it costs roughly one month of growth versus the alternative, and it matches how a paycheck deduction actually behaves. And the rate is applied as a smooth constant, which no market has ever delivered. The mechanism itself — earnings that start earning — is explained without the machinery in compound interest.
Picking a rate you can defend
The default is 7%, and that is a deliberate choice. The US stock market has returned roughly 10% a year over the long run before inflation and about 7% after it. Typing 7% keeps the ending balance in today's purchasing power, so the number that comes out means what it appears to mean. Type 10% instead and you get a bigger figure denominated in future dollars that buy less — a real answer to a question nobody asked.
Above 8%, you are no longer planning, you are hoping. Below the market average is where cash and bonds live: for money in a savings account, 3% or 4% is honest, and for a mixed portfolio, 5% to 6%. Where the long-run equity figure comes from and why most people should capture it through broad index funds rather than stock picking is covered on the investing hub.
When interest overtakes deposits
The table exists for one reason: to show the crossover. With the default inputs — $10,000 to start, $500 a month, 7%, 30 years — the interest column passes the deposit column in year 17, at about $115,820 of interest against $112,000 of deposits. Before that point you are carrying the account. After it, the account is carrying you.
What follows the crossover is the part people underestimate. The final five years of that 30-year run add $228,860 to the balance — more than the entire first seventeen years produced. Nothing changes in year 26; the contribution is the same $500. The base is simply large enough that a 7% return on it dwarfs anything you can deposit. This is also why quitting three years early costs far more than starting three years late feels like it should, and why contributing on a fixed schedule and then leaving the account alone beats almost every clever alternative.
What this tool does not model
Four omissions, in rough order of how much damage they do.
Fees. A 1% annual advisory fee is not a 1% haircut. Run the defaults at 6% instead of 7% and the ending balance falls from $691,150 to $562,483 — the fee took $128,667, roughly a fifth of the result, for the same deposits. If you pay a percentage of assets to anyone, subtract it from the rate before you type it.
Taxes. The calculator compounds untaxed, which is accurate inside a 401(k) or a Roth IRA and optimistic in a taxable brokerage account, where dividends and realized gains are taxed along the way. Contribution limits and account rules change by year, so check the current IRS figure rather than trusting any number printed on a web page.
Inflation. Handled only by your choice of rate. Use a real (after-inflation) rate and the output is in today's dollars; use a nominal rate and it is not. Mixing them is the most common way these projections go wrong.
Sequence of returns. Real markets deliver the average unevenly, and the order matters. While you are still contributing, an early crash is quietly good for you — you buy more shares cheaply. A crash in the last five years, against the largest balance you have ever had, is the expensive one. The straight line in the table is the average of many jagged paths, not a forecast of any one of them.
Using the number you got
If the ending balance is short of what you need, only three inputs can change it, and you control two. Extending the horizon is usually the cheapest: the same defaults run for 35 years instead of 30 finish at $1,015,589 rather than $691,150, from an extra $30,000 of deposits. Raising the monthly figure is the other real lever, which is a question about your savings rate more than your portfolio. Chasing a higher rate is the lever that looks tempting and behaves worst.
One caution before you feed the calculator everything you have: money you will need within about three years does not belong in a 7% assumption. That is what an emergency fund is for, and its job is to be boring and available, not to compound. Everything above that line is what this tool is describing.
To run the question backwards — naming a target and solving for the monthly deposit it requires — use the savings goal calculator. To solve specifically for the date you cross seven figures, the millionaire calculator does that in one step.
Educational content, not financial, tax, or legal advice. Figures are illustrations based on stated assumptions, not guarantees; markets involve risk, including loss of principal.