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Compound Interest Calculator

Free compound interest calculator: see how a starting balance plus monthly contributions grows year by year. Chart, milestones, Rule of 72 doubling, and tax-smart tips.

Last reviewed: January 2026 · Tax data verified against IRS Publication 15-T & state revenue departments

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How This Calculator Works

Simple interest pays you only on your original deposit. Compound interest pays you on your deposits AND on every dollar of interest you've already earned — which is why the curve in the chart above bends upward instead of running straight. Each month the engine below adds your contribution, applies the monthly rate to the whole balance, and starts over. Nothing is withdrawn, everything keeps working.

The force multiplier is time. At a 7% average return, $500 a month for 10 years grows to about $86,000 — of which $26,000 is interest. Run the same plan for 30 years and it's about $610,000, with $430,000 of it earned by compounding. You can verify the pattern with the SEC's own compound interest tool — the doubling shortcut is the Rule of 72: at 7%, money doubles roughly every 10.3 years.

Where the money lives decides how much of the growth you keep. In a regular brokerage account, dividends and realized gains are taxed along the way, which shrinks the base that compounds. A 401(k) compounds untaxed until withdrawal, and a Roth does it tax-free forever. The difference isn't subtle: a 1% annual tax drag on a 7% return costs roughly a quarter of your final balance over 30 years.

Two honest caveats the calculator can't show. Returns arrive lumpy — a real 7% average includes years at +25% and years at −15%, and money added late in the run never gets time to recover from a bad one. And inflation quietly discounts the ending figure: at 2.5% inflation, $610,000 in 30 years buys what about $291,000 buys today. Plan using nominal returns, but retire knowing the real number.

How It's Calculated

Formula

FV = P(1 + r)^n + PMT × [((1 + r)^n − 1) ÷ r] (monthly r, n = months)

Step-by-Step

  1. 1Convert the annual return to a monthly rate (7% ÷ 12 ≈ 0.583%/mo)
  2. 2Grow the starting balance each month by (1 + monthly rate)
  3. 3Add the monthly contribution after the growth is applied
  4. 4Repeat for every month in the horizon; interest earns interest on the new total
  5. 5Future Value − Total Deposits = Interest Earned

Example

$10,000 start + $500/month at 7% for 30 years: deposits total $190,000; the account ends near $691,000 — compounding contributed about $501,000.

For detailed data sources and full methodology, see our Methodology & Data Sources page.

Key Rates & Data for 2026

Historical S&P 500 (nominal)

~10% / yr long-run average

Balanced 60/40 Portfolio

~7–8% / yr

High-Yield Savings (2026)

~3.5–4.5% APY

Rule of 72

Doubling time ≈ 72 ÷ return %

Monthly vs Annual Compounding

~0.03–0.1 pt effective difference

Frequently Asked Questions

What is the Rule of 72?

The Rule of 72 is a mental shortcut for how long money takes to double: divide 72 by your annual return rate. At 7%, money doubles roughly every 10.3 years (72 ÷ 7); at 10%, about every 7.2 years. It works because compound growth is exponential — the growth rate applies to accumulated gains, not just your deposits. It's surprisingly accurate for rates between 4% and 12% (the exact number is 69.3 × ln-adjusted, but 72 is divisible by more numbers, which is why it won). Quick application: if you're 30 and expect 7% average returns, every dollar you invest today doubles about three and a half times by 65 — $10,000 becomes roughly $105,000.

What return rate should I use in the calculator?

It depends on where the money sits. High-yield savings accounts currently pay around 3.5–4.5% APY (FDIC-insured, no stock risk). A balanced 60/40 portfolio has historically returned about 7–8% annually over long periods. The S&P 500's long-run average is roughly 10% nominal (about 7% after inflation) — but with years that swing +30% and −20% along the way. A common planning default is 6–8% for retirement investments, 4–5% for a conservative mix near retirement, and current HYSA rates for emergency funds. Don't use the best year you remember — sequence of returns matters, and the money you contribute in the final years never gets time to compound.

How much does monthly vs annual compounding actually matter?

Less than most people think, but it's free money. On $10,000 at 7% for 20 years: annual compounding gives $38,697, monthly gives $40,387 — a difference of about $1,690, or roughly 4.4%. The formula behind it: more frequent compounding means interest earns interest sooner. Daily compounding (what banks advertise) adds only a few dollars more per decade than monthly at the same rate. What matters far more: fees (a 1% annual fee costs about 25% of your final balance over 30 years — it compounds against you) and your contribution amount. Bump monthly savings by $100 at 7% for 30 years and you end up with roughly $122,000 more.

How do taxes affect compound growth?

Taxes are a silent compounding killer because they skim gains every year, so the base you roll forward shrinks. In a taxable brokerage account, qualified dividends and long-term gains run 0–20% federal (plus 3.8% NIIT at higher incomes), and mutual funds can distribute taxable gains annually even if you never sold. Tax-advantaged accounts fix this: a traditional 401(k) or IRA compounds fully tax-deferred (you pay once at withdrawal), a Roth compounds tax-FREE (you already paid on contributions), and an HSA is the only triple-advantaged account — deductible in, tax-free growth, tax-free out for medical costs. See how your 401(k) compounds with our <a href="/401k-calculator">401(k) calculator</a>.

How much do I need to invest monthly to reach $1 million?

At a 7% average return: starting at 25, about $381/month does it in 40 years; at 35, $820/month in 30 years; at 45, $1,920/month in 20 years. The pattern is the whole point of compounding — time does more work than deposits. The 25-year-old contributes about $183,000 total and earns $817,000 in interest; the 45-year-old contributes $461,000 to earn $539,000. If $1M sounds abstract, anchor it to the 4% rule: a $1M portfolio can roughly support $40,000/year of inflation-adjusted withdrawals in retirement. Play with the numbers above, then check your state-specific savings power with our <a href="/paycheck-calculator">paycheck calculator</a>.

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<a href="https://thetaxcalc.com/compound-interest-calculator" title="Compound Interest Calculator 2026 — Free Investment Growth Projector">Compound Interest Calculator 2026 — Free Investment Growth Projector</a>

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