Advanced Compound Interest Calculator
Project your investment growth with regular contributions, inflation adjustments, and tax considerations
Investment Details
Advanced Options
Future Value
$102,320.45
Total Contributions
$70,000
Interest Earned
$32,320.45
After Taxes
$89,972.38
Inflation-Adjusted
$78,456.29
Monthly Income (4% Rule)
$341.07
Annual Growth
7.2%
Target Achieved
62%
Investment Growth Projection
Compound Interest vs. Simple Interest
See how compound interest dramatically outperforms simple interest over time, especially with regular contributions. This comparison shows why starting early and contributing consistently leads to significantly greater wealth accumulation.
Compound Interest Calculator FAQs
What is compound interest and how does it work?
Compound interest is the interest calculated on the initial principal and also on the accumulated interest of previous periods. It’s often called “interest on interest” and can cause wealth to grow exponentially over time. For example, if you invest $10,000 at 7% annual return, in the first year you earn $700. In the second year, you earn 7% on $10,700 ($749), and so on. Over decades, this compounding effect can turn modest savings into significant wealth.
How often should interest compound for maximum growth?
The more frequently interest compounds, the greater your returns will be. Daily compounding provides slightly better returns than monthly, which is better than quarterly or annual compounding. However, the difference becomes more significant over longer time periods. For most investors, monthly compounding (common in many investment accounts) provides an excellent balance between growth and simplicity.
Why is the inflation-adjusted value important?
Inflation reduces the purchasing power of money over time. While your investment might grow to $100,000 in nominal terms, if inflation averages 2.5% annually, that $100,000 might only have the purchasing power of $75,000 in today’s dollars. The inflation-adjusted value helps you understand the real value of your future savings in terms of today’s purchasing power.
What’s the 4% retirement rule shown in the calculator?
The 4% rule is a common retirement withdrawal strategy that suggests you can withdraw 4% of your portfolio in the first year of retirement, then adjust that amount for inflation each subsequent year, with a high probability your savings will last 30+ years. Our calculator shows what monthly income this might provide (4% of your ending balance ÷ 12 months).
How do regular contributions affect compound growth?
Regular contributions dramatically accelerate compound growth because you’re continually adding to the principal amount that earns interest. Even modest monthly contributions can make a huge difference over time. For example, $500/month at 7% growth becomes over $500,000 in 30 years, with nearly 60% of that coming from investment growth rather than your direct contributions.
What’s a realistic annual return rate to use?
Historical stock market returns average about 7-10% annually before inflation (4-7% after inflation). Conservative investors might use 5-6%, while more aggressive investors might use 7-8%. For cash or bonds, 2-4% might be more appropriate. Remember that higher returns typically come with higher risk. Our calculator lets you test different scenarios to see how sensitive your results are to return rate changes.