How to use this compound interest calculator
- Enter your age, what you have saved for retirement today, and how much you add each month or each year.
- If your contributions will rise with your pay, enter the yearly increase. Set how many years you will keep contributing.
- Check the return, compounding, inflation and fee assumptions. Turn on withdrawals to see how long the balance lasts in retirement.
- Read your balance in future and today's dollars, the split between your money and growth, and the what-if table.
What is compound interest?
Compound interest is interest earned on interest. The SEC's investor education site puts it simply: $100 earning 5% becomes $105.00 after one year and $110.25 after two, because the second year pays interest on the first year's $5 as well as on the original $100[1]. After 10 years the same $100 is worth $162.89, and after 25 years $338.64, without adding a cent.
For retirement savings the effect is much larger, because the amounts are bigger and the time is longer. Money you invest at 30 may stay invested for 50 years or more: through your working life and then through a retirement that can last decades.
What is the compound interest formula for retirement savings?
A retirement balance has two parts: what you start with, and what you add along the way. Each has its own formula.
- Starting balance: A = P × (1 + r/n)n×t, where P is the starting balance, r the annual rate, n the number of times interest compounds each year and t the number of years.
- Regular contributions: FV = PMT × ((1 + i)k − 1) ÷ i, where PMT is the amount you add each period, i the rate per period and k the number of periods. This assumes each deposit is made at the end of the period.
Worked example
Say you have $10,000, add $500 a month, and earn 7% a year compounded monthly, with no fees, for 35 years:
- Starting balance: $10,000 × (1 + 0.07/12)12×35 = $115,062
- Contributions: $500 × ((1 + 0.07/12)420 − 1) ÷ (0.07/12) = $900,527
- Total: $1,015,589, of which you put in $220,000.
Set the calculator to the same inputs (monthly compounding, 0% fees) and it shows $1,015,589: the same answer, because it applies these formulas month by month. Month-by-month steps let it handle what the formulas can't: contributions that rise each year, fees, withdrawals and a balance shown in today's dollars.
Does compounding frequency matter?
Only a little. More frequent compounding means interest starts earning interest sooner, so a stated rate (an APR) is worth slightly more compounded daily than yearly. The effective annual rate, (1 + r/n)n − 1, captures this. Here is $10,000 at a stated 6% for 30 years (our calculation):
| Compounding | Effective annual rate | After 30 years |
|---|---|---|
| Yearly | 6% | $57,435 |
| Quarterly | 6.14% | $59,693 |
| Monthly | 6.17% | $60,226 |
| Daily | 6.18% | $60,488 |
For a savings account or CD quoted as an APR, choose how often the bank credits interest. For investments, the return you plan with is usually already an annual average (a compound annual growth rate), so choose Yearly. Picking "daily" for a fund return quietly adds a small amount of growth that the fund never promised.
How much of your balance is growth on growth?
The calculator splits your balance three ways: the money you put in, growth earned directly on that money, and growth earned on earlier growth. The last part is what makes compounding different from simple interest, and it grows the longer you wait. With the default plan (our calculation):
| Years invested | Balance | Your money | Growth on it | Growth on growth |
|---|---|---|---|---|
| 10 | $104,574 | 67% | 25% | 8% |
| 20 | $288,885 | 45% | 32% | 23% |
| 30 | $648,079 | 29% | 31% | 40% |
| 35 | $940,236 | 23% | 29% | 48% |
After 10 years, growth on growth is only 8% of the balance and most of it is still your own money. After 35 years it is the largest part, at 48%. That is why the final years do so much of the work: the default balance grows 3.3 times between year 20 ($288,885) and year 35 ($940,236), while you add only $90,000.
What happens if you start 10 years earlier?
Time is the strongest input in the formula, because it sits in the exponent. Take three savers who are all 25 today, each investing $500 a month at 7% with 0.1% fees, and compare them at 65 (our calculation):
| Saver | Puts in | Balance at 65 | Today's dollars |
|---|---|---|---|
| Invests from 25 to 35, then stops | $60,000 | $629,781 | $193,064 |
| Waits, then invests from 35 to 65 | $180,000 | $574,062 | $175,983 |
| Invests from 25 to 65 | $240,000 | $1,203,843 | $369,046 |
The early saver puts in a third as much as the late one and still ends up with more, because each of their dollars compounds for 30 to 40 years, while the late starter's dollars get 30 years at most. The saver who starts early and keeps going ends with about 2.1 times the late starter's balance. If you are starting late, the fix is a higher savings rate rather than a higher assumed return; the savings rate calculator shows what that rate does to your retirement date.
How much do I need to save a month to reach $1 million?
Run the formula backwards and you get the monthly amount that reaches a goal. Here is what it takes to have $1,000,000 at 65, starting from nothing, at 7% a year with 0.1% fees (our calculation):
| Start at | Save each month | $1 million at 65 in today's dollars |
|---|---|---|
| 25 | $415 | $306,557 |
| 35 | $871 | $411,987 |
| 45 | $1,993 | $553,676 |
| 55 | $5,876 | $744,094 |
Starting at 25 takes $415 a month; waiting until 45 takes $1,993, about 5 times as much. The last column is the catch: a million dollars at 65 is worth much less to someone who is 25 today, because it has 40 years of inflation to absorb. Set a goal in today's dollars, such as your FIRE number, and the calculator's today's-dollars line tells you whether you get there.
How much do fees cost over a career?
Fees come off your return every year, so they compound against you. The Department of Labor's example: $25,000 left for 35 years at a 7% average return grows to $227,000 with 0.5% fees but only $163,000 with 1.5% fees, a 28% smaller balance from a one-point difference[2]. Our engine reproduces it: $226,556 and $162,846.
Here is the default plan ($10,000 plus $500 a month for 35 years at 7%) at different fee levels (our calculation):
| Annual fees | Balance at 65 | Today's dollars | Lost vs 0.05% fees |
|---|---|---|---|
| 0.05% | $951,283 | $338,070 | – |
| 0.1% | $940,236 | $334,144 | 1% |
| 0.5% | $856,750 | $304,475 | 10% |
| 1% | $763,663 | $271,393 | 20% |
| 1.5% | $681,663 | $242,252 | 28% |
Going from a 0.1% index fund to a portfolio costing 1% a year in total costs about $176,573 by 65. You never see a bill for it; it simply never compounds for you.
What is the Rule of 72?
The Rule of 72 is a shortcut for compound growth: divide 72 by your annual rate of return to estimate how many years your money takes to double. Investor.gov's example is a 9% return, which doubles money about every 8 years[1]. The exact answer is ln 2 ÷ ln(1 + r); the rule is close for the rates most investors use (our calculation):
| Annual return | Rule of 72 | Exact doubling time |
|---|---|---|
| 2% | 36.0 years | 35.0 years |
| 4% | 18.0 years | 17.7 years |
| 6% | 12.0 years | 11.9 years |
| 7% | 10.3 years | 10.2 years |
| 8% | 9.0 years | 9.0 years |
| 10% | 7.2 years | 7.3 years |
| 12% | 6.0 years | 6.1 years |
Use it on real returns too. At a 3.8% real return, the rule says your purchasing power doubles about every 19 years, which is a more honest picture than the 10 years you get from 7%.
Why do real returns matter?
A balance 35 years from now will be spent at 35-years-from-now prices. At 3% inflation, $1,000,000 in 35 years buys what $355,383 buys today. That is why the calculator shows both numbers, and why our other calculators work entirely in today's dollars.
To turn a nominal return into a real one, use the Fisher equation: real return = (1 + nominal return − fees) ÷ (1 + inflation) − 1. With 7% returns and 3% inflation, the real return is 3.88%, not the 4% you get by subtracting; with 0.1% fees it is 3.79%. Growing your starting balance and contributions at that real rate gives the same today's-dollar balance as growing them at 7% and then dividing by inflation. US inflation averaged 3.0% a year from 1928 to 2025[3], and consumer prices rose 3.7% in the 12 months to September 2026[5].
One more reason to think in real terms: flat contributions shrink. $500 a month in 35 years is worth far less than it is today. If you raise your contributions 3% a year to keep pace with pay, the default plan grows to $1,296,236 ($460,661 in today's dollars) instead of $940,236.
What return should I use for retirement compound interest?
Use a long-run rate you would be comfortable relying on, and test a lower one. From 1928 to 2025, US stocks (the S&P 500 with dividends) compounded at 10.0% a year, or 6.8% after inflation; 10-year Treasury bonds compounded at 4.5%, or 1.5% after inflation[3]. Vanguard's current 10-year forecasts are lower for stocks: 4.8%-6.8% a year for US stocks and 5.1%-6.1% for US bonds[4]. The 7% default sits between history and forecasts for a stock-heavy portfolio.
Watch which average you use. The simple average of yearly US stock returns over the same period was 11.9%, 1.8 percentage points higher than the 10.0% compound rate. Ups and downs drag compound growth below the simple average (a 50% loss needs a 100% gain to recover), so only the compound rate belongs in a compound interest formula.
How long will my savings last with withdrawals?
Compounding keeps working after you retire: the balance you haven't spent yet keeps growing. Turn on withdrawals to see the whole arc. With the default plan, the balance at 65 is $940,236, or $334,144 in today's dollars (our calculation):
- Withdrawing $15,000 a year in today's dollars (raised with inflation), the money lasts past 100.
- Withdrawing $20,000 a year, it lasts to age 91. The first year's withdrawal is $56,277 in future dollars, because prices will have risen.
- Withdrawing $25,000 a year, it runs out at 83.
For comparison, the 4% rule would start you at $13,366 a year in today's dollars. William Bengen found that a 4% first-year withdrawal, raised with inflation, lasted at least 33 years in every historical period he tested[6]. This calculator assumes a steady return, but real markets don't deliver one, and a crash early in retirement does more damage than the same crash later[7]. To test withdrawals against market history, use the how long will my savings last calculator or the safe withdrawal rate calculator.
Common compound interest mistakes
- Reading future dollars as today's dollars. At 3% inflation, a balance 35 years from now buys only 36% as much as the same number today. Plan with the today's-dollars figure.
- Using the simple average return. Compound growth runs at the compound (geometric) average, which is lower.
- Leaving out fees. A 1% fee looks small, but in the table above it costs 20% of a 35-year balance.
- Choosing daily compounding for an investment. Fund returns are already annual averages; extra compounding overstates them.
- Treating a projection as a promise. Markets swing. Use a cautious return and revisit the plan every year or two.
From compound interest to financial independence
Compound growth is the engine behind early retirement. Once your balance is large enough that a safe withdrawal covers your spending, work becomes optional. The FIRE calculator finds that point for you, and the Coast FIRE calculator shows when compounding alone can carry today's savings to a full retirement.