Compound Interest Calculator

What compound interest actually is

Simple interest pays you on your principal only. Compound interest pays you on your principal and on every dollar of interest you've already earned — which starts earning its own interest the moment it lands. That's the whole trick, and it's why the balance line on the chart above curves upward instead of running in a straight line: the amount you earn each year is a percentage of a growing number, not a fixed number.

Picture a savings account paying simple interest on $10,000 at 7%: it pays exactly $700 a year, every year, forever, because the interest is always calculated on the original $10,000. A compounding account pays $700 the first year too — but the second year it pays 7% of $10,700, not $10,000, so the payout is $749. By year ten the payout on that same starting balance is over $1,300 a year, nearly double the flat simple-interest payment, without a single extra dollar being deposited. The rate never changed. Only the base it's applied to did.

Early on, the compounding curve looks almost flat — most of the balance is still your own contributions, and growth is a rounding error next to them. Give it a decade or two and the relationship flips. In the worked example below, the balance more than triples what was actually deposited, and none of that gap came from a lucky pick or a hot year. It came from time, applied relentlessly, month after month, to a rate that never took a year off.

Every default, and why it's set where it is

Nothing on this page is arbitrary. Change any of it — that's the point of a calculator, not a brochure — but here's what each default is doing and why it starts there:

• Starting balance — $10,000. A round number chosen so the math scales cleanly: every output on this page is linear in principal, so if your real starting balance is $25,000, multiply the tiles by 2.5 and you're there. It's not meant to represent "the average investor" — it's meant to be easy arithmetic.
• Monthly contribution — $500. A realistic middle-ground automatic-investment amount — enough to matter, low enough that most working budgets can plausibly hit it every month without heroics. Swap in your real number; the projection is far more sensitive to this field than almost any other.
• Annual contribution increase — 0%. Off by default, deliberately conservative. A calculator that assumes you'll raise your savings rate every year flatters itself. Turn this on once you have a habit — a 2–3% bump roughly tracking a typical raise is a reasonable place to start once you do.
• Annual return — 7%. A nominal (before-inflation) long-run assumption, the same one used across this site's calculators, documented and sourced against long-run diversified equity averages — see the "What return should I assume?" FAQ below for the reasoning and the caveats.
• Compounding — Monthly. The realistic default for a brokerage account or a dividend-reinvesting fund, where growth and reinvestment happen continuously rather than once a year. Quarterly and annually exist for bonds, GICs, and other products that compound on slower schedules.
• Years — 10. Long enough for compounding to visibly overtake contributions (watch the two lines on the chart cross), short enough to still feel like a plan you can hold in your head rather than a fantasy about a future you can't picture. Stretch it to 20 or 30 to see what patience actually buys.

The worked example

Run the defaults exactly as they load — $10,000 starting balance, $500 a month, 7% annual return compounded monthly, no contribution growth, 10 years, no withdrawals — and here's what comes out the other end:

Seventy thousand dollars went in, over ten years, in $500 monthly installments plus the initial $10,000. A little over $37,000 of that final balance was never deposited by anyone — it's pure growth, more than half of everything that was actually contributed. That's not an edge case; that's what a 7% return does to a decade-long habit. Nudge the horizon out to 20 or 30 years in the form above and watch the growth line pull further and further ahead of the contribution line — that gap, not the contribution total, is the entire argument for starting early.

The formula

For a lump sum with no contributions, the standard compound-interest formula is:

FV = P × (1 + r/m)^(m × t)

where P is principal, r is the nominal annual rate, m is compounding periods per year, and t is years. Add regular contributions and the lump-sum term gets a second term added to it — the future value of an annuity:

FV = P × (1 + i)^n + C × [((1 + i)^n − 1) / i]

where i is the effective rate per contribution period and n is the number of periods. That closed-form version is exact for a flat contribution and a flat rate — but the moment you add a contribution that grows every year, or a withdrawal phase that starts partway through, the closed form stops being one clean equation and turns into a sum of several. Rather than maintaining a growing pile of special-case formulas, this calculator runs the same logic the formula encodes as a month-by-month loop: add the month's contribution, subtract any withdrawal, apply that month's growth, and move to the next month. Same math, same answer for the simple case — and it stays correct once the inputs stop being simple.

One detail worth being explicit about, since it's easy to get wrong by a percentage point or two: a nominal rate compounded more frequently isn't the same number as that rate compounded annually. This calculator converts whatever compounding frequency you pick into an effective annual rate first, then back into an effective monthly rate, so a month-by-month loop always lands on the correct answer regardless of whether you told it to compound monthly, quarterly, or annually — you shouldn't see the end balance jump around for the wrong reasons just because you switched that dropdown.

Why the withdrawal phase matters

Almost every compound-interest calculator on the internet stops the story at retirement day. You hit your number, the chart peaks, the page congratulates you, the end. That's the easy half of the problem. The balance doesn't stop needing to do work just because you stopped contributing to it — it needs to keep growing while you're pulling money out of it, for another twenty or thirty years, without running dry before you do.

That's what the "Retirement withdrawals" section does. Set a start year and a monthly withdrawal amount, and the same month-by-month engine keeps running past the point where contributions stop — it just switches from adding money to subtracting it, still applying growth every month in between. If the withdrawal rate is sustainable relative to the return you assumed, the balance plateaus or keeps climbing. If it isn't, the balance heads toward zero, and this calculator will tell you the exact year it gets there instead of quietly not mentioning it. A calculator that only shows accumulation is only telling you half of whether your plan works.

To see the effect in its starkest form, imagine a $100,000 balance earning a flat 0% return with no further contributions, paying out $1,000 a month starting immediately: it depletes in year 9, almost exactly — twelve years of $12,000-a-year withdrawals against a balance that never grew a cent. Give that same balance a real return instead of 0%, and growth buys back years the withdrawals would otherwise have burned through; give it too high a withdrawal rate relative to the return, and it depletes anyway, just later. The point of running your own numbers through the withdrawal section isn't to get a reassuring answer — it's to find out which of those two stories you're actually in, and which year the line crosses zero if you are.

Rule of 72

Divide 72 by your annual return percentage and you get an estimate of how many years it takes your money to double, with no contributions in the picture — just growth acting on a static lump sum. At the 7% default, that's 72 ÷ 7 ≈ 10.3 years, which is a useful gut-check against this calculator's own numbers: run the defaults with zero monthly contribution over roughly 10.3 years and the end balance should land close to double the starting $10,000. It's a shortcut for sanity-checking a return assumption in your head, not a substitute for running the real numbers — it ignores contributions entirely, and it gets progressively less accurate at very high or very low rates. Use it to eyeball whether a number someone quoted you is plausible; use the calculator above for the actual plan.