How to use the Compound Interest Calculator
- Enter your starting amount, monthly contribution, expected interest rate, and timeline.
- Adjust the strategy settings: compound frequency, annual step-up, tax drag, and inflation.
- Review the inflation-adjusted balance, growth chart, and year-by-year table, then export the CSV.
Compound Interest Calculator FAQs
What is compound interest?
Compound interest is "interest on interest." You earn a return not just on your original money, but also on the accumulated interest from previous periods, which creates an exponential growth effect over time.
What interest rate should I assume?
For stock market investments like index funds, a historical average between 7% and 10% (nominal) is often cited. For high-yield savings accounts, 3-5% is common. Always account for inflation (2-3%) for a more conservative estimate.
How often does interest compound?
Most savings accounts and loans compound monthly (12 times a year). The stock market does not technically compound at a set frequency, but annual compounding is a safe standard for long-term projection models.
How does the step-up feature work?
The step-up feature simulates a salary increase. If you save $500 per month and set a 3% step-up, next year you will automatically save $515 per month. This drastically changes long-term outcomes.
What are tax drag and inflation adjustment?
Tax drag subtracts your tax rate percentage from annual investment gains, giving a realistic post-tax picture. Inflation adjustment uses the standard discount formula, so the "Future Balance" shown reflects today's purchasing power when inflation is set above 0%.