Compound Interest Calculator
Calculate portfolio growth with regular contributions, inflation adjustment, and FIRE target planning
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Understanding Compound Interest
The Power of Compounding
Compound interest means you earn interest on your interest. A $10,000 investment at 10% grows to $17,449 in 6 years — without adding a single dollar.
Inflation Impact
3% inflation halves your purchasing power in ~24 years. A $1M portfolio in 2054 will feel like ~$412K today. Always plan with real (inflation-adjusted) returns.
Realistic Return Assumptions
The S&P 500 has averaged ~10% nominal, ~7% real since 1957. Past performance doesn't guarantee future results — plan conservatively for safety.
Time Is Your Best Asset
Starting at 25 vs 35 can result in 2-3x more wealth at retirement, even with identical contributions, purely due to extra compounding years.
Frequently Asked Questions
What is compound interest?
Compound interest is interest calculated on both the principal and the accumulated interest. Unlike simple interest (calculated only on principal), compound interest accelerates growth exponentially over time. Einstein reportedly called it the "eighth wonder of the world."
How long does it take to reach $1 million?
It depends on your starting amount, monthly contributions, and return rate. With $500/month at 10% annual return starting from zero, it takes approximately 30 years. With $1,000/month starting from $50,000, you can reach $1M in about 20 years. Use this calculator to find your specific timeline.
What return rate is realistic?
The S&P 500 has returned ~10% annually (nominal) since 1957. After inflation (~3%), real returns average ~7%. Financial planners typically use 6-8% for conservative planning. Individual stocks, international funds, and bonds will vary significantly.
What is FIRE and how does the FIRE target work?
FIRE (Financial Independence, Retire Early) is a movement to accumulate enough wealth to retire early using the 4% safe withdrawal rule. Your FIRE number is typically 25x your annual expenses. This calculator highlights the year you hit your target portfolio value.
How does compound frequency affect growth?
More frequent compounding means slightly higher returns. Monthly compounding at 10% APR gives an effective annual rate (EAR) of ~10.47%, while annual compounding gives exactly 10%. The difference becomes meaningful over decades — monthly vs annual compounding on $100K over 30 years is roughly $30,000 more.