Compound interest calculator

See what a lump sum grows to with compounding — then see the same number after inflation and tax, which is the figure you'll actually spend. Real rates, real math.

How the math works

Compounding means the interest earns interest. Each period, the rate applies to the whole balance — principal plus every dollar of interest already credited. That's the standard periodic compound interest formula.

Where A is the future value, P is the starting amount, r is the annual rate as a decimal, n is the number of times interest compounds per year, and t is the number of years. If you add monthly contributions, each one is its own small annuity that compounds from the month it lands, and the calculator sums them on top of the lump sum.

Push n to infinity and the formula becomes continuous compounding, A = Pert — the theoretical ceiling. The gap between monthly compounding and that ceiling is where a lot of marketing lives and very little money does.

Worked example

Take $10,000 left alone for 30 years at 10.2% — the S&P 500's long-run average annual nominal return since 1926. With monthly compounding, it grows to $210,535.30. Of that, $200,535.30 is interest. The starting $10,000 did almost none of the work; the compounding did the rest.

That's the number every calculator shows you. Here's the one they don't. Deflate it by the post-WWII inflation average of 3.3% a year and that $210,535.30 is worth $79,490.51 in today's purchasing power. Still a strong result — but it's the honest one. The same dataset's real-return series pegs the long-run real return at 7.0%, and compounding $10,000 at 7% for 30 years lands at $76,122.55, in the same neighbourhood. Two roads, one real answer: roughly the high-$70,000s in today's money, not $210,000.

When this calculator is wrong

Every compound interest calculator is a straight-line projection of a rate that never actually holds still. Here's where the number misleads.

• The compounding-frequency dropdown barely matters at retail rates. Grow $10,000 at 4.00% for 10 years and the gap between annual and continuous compounding is about $115.80 — on a balance near $14,900. Monthly versus daily is a few dollars. The dropdown implies a choice worth caring about; at the rate a savings account pays, it's noise. It starts to matter only when the rate and the horizon are both large — at 10.2% over 30 years the frequency choice swings the result by tens of thousands.
• It ignores inflation unless you tell it to. A number 30 years out is quoted in dollars that will buy less. At 3.3% inflation, a dollar in 30 years is worth about 38 cents today. The "in today's dollars" line above is the figure to plan around.
• It treats the growth as tax-free. In a regular brokerage or savings account, the interest is taxed — as ordinary income for cash, or at capital-gains rates for investments held long enough. Set the tax field to your rate and watch the real number drop. Inside a Roth IRA, HSA, or 529, the growth is genuinely untaxed and you can leave it at zero.
• It assumes one fixed rate forever. No cash account pays 4% for 30 years, and no stock index returns exactly 10.2% in any single year — the average is built from wild swings. The projection is a centre of gravity, not a forecast.

What to do with the result

Read the "in today's dollars" figure, not the headline. The nominal number is the one that sells retirement seminars; the inflation-adjusted one is what the money buys. If your rate is above roughly 6%, you're modelling an investment, not a savings account, and short-horizon money — anything you need inside three years — shouldn't be in there.

One more move the math rewards: the fee you pay eats the same compounding curve as the return you earn. The average actively managed U.S. equity fund charges 0.66% a year; the broad-market index alternative charges 0.03%. Over 30 years that spread compounds into a five-figure hole on a $10,000 stake. If you're going to trust compounding to build the number, don't hand most of it back in expenses.

Common questions

What's the difference between compound and simple interest?

Simple interest pays only on the original principal. Compound interest pays on the principal plus all the interest already earned, so the balance grows faster over time. At 7% over 30 years, compounding roughly triples what simple interest would produce on the same stake.

How often should interest compound?

For cash accounts it barely changes the outcome — at 4%, annual versus daily compounding is worth about $116 on $10,000 over a decade. Pick whatever your account offers and don't optimise for it. The rate and the number of years do the heavy lifting.

Should I use the nominal or the inflation-adjusted number?

The inflation-adjusted one, for any plan more than a few years out. The nominal figure tells you the account balance; the real figure tells you what it buys. Over 30 years at 3.3% inflation, the two differ by more than half.

Does the calculator account for taxes?

Only if you enter a tax rate. Interest in a taxable account is taxed — ordinary income for cash, capital-gains rates for long-held investments. In a Roth IRA, HSA, or 529, the growth is untaxed, so leave the tax field at zero.

Is 10% a safe rate to assume for stocks?

10.2% is the long-run nominal average, but it's assembled from years of double-digit gains and double-digit losses, and it's before inflation. Model 7% real if you want the figure in today's dollars, and treat any single-year projection as fiction.