Compound interest calculator

More frequent compounding means interest is calculated and added more often, so you earn interest on interest sooner. $10,000 at 6% compounded monthly yields $10,617 after one year. Compounded annually yields $10,600. Small difference in one year, but it compounds over decades.

Charlie Munger's line. When you're starting from zero, growth is slow. But once you have $100K earning 7%, that's $7,000/year in growth without lifting a finger. At $500K, it's $35,000/year. The dollars-per-year from compounding accelerate as the base grows.

A 7% return with 3% inflation is really a 4% real return. Your account grows nominally, but purchasing power grows slower. Use nominal rates for projections; subtract inflation mentally to understand real wealth growth.

In a taxable account, you pay tax on interest/gains annually, which slows compounding. In a 401(k) or IRA, earnings compound tax-deferred. $10K at 7% for 30 years: taxable (25% tax) = ~$55K, tax-deferred = ~$76K. Deferral adds $21K to the same investment.

Historically, US stock market averages about 10% nominal (7% after inflation). Bonds run 4–6%. Savings accounts under 1% (as of 2024, some high-yield savings >4%). Nothing is guaranteed, but 7% real is a common long-term planning assumption for diversified equity.

More frequent is better. Monthly compounding earns slightly more than annual because interest is added to the balance sooner. For most long-term projections, the difference is small but real.

As much as you can afford without derailing short-term needs. Even $100/month adds up. Use the calculator to see how different contribution levels change your outcome over 10, 20, or 30 years.

As early as possible. Compound growth needs time. Ten years of contributions in your 20s can outpace twenty years of contributions starting in your 40s, purely because of the extra decade of compounding.