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How Much Do You Know About Compound Interest?
Eight questions on growth, taxes and inflation.
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Compound Interest and Real Return Calculator
Model nominal growth, after-tax returns and inflation-adjusted purchasing power, and see how much of your balance is contributions versus growth.
Watch the 75-second explainerQuestions this answers
- How much will my savings grow over time?
- What is my money worth after inflation?
- How much do taxes reduce my investment growth?
- How much of my balance comes from interest versus contributions?
- How much do I need to save each month to reach a goal?
Investment
Initial investmentYour starting principal. Even a small amount benefits from compounding: the earlier you start, the more doublings you capture.
Annual contributionThe amount you add each year. Consistent contributions dramatically accelerate growth, especially in the early years.
Annual return7% reflects the long-term historical real return of a diversified US stock portfolio. Small differences in return rate produce dramatically different outcomes over 20+ years.
Tax
Taxable accountCapital gains are taxed when you sell. Dividends may be taxed annually. Tax drag can cost hundreds of thousands over a long horizon.
401k / IRA (tax-deferred)All growth is deferred until withdrawal, when the full balance is taxed as ordinary income. Best when you expect to be in a lower tax bracket in retirement.
RothContributions are after-tax, but all growth and withdrawals are completely tax-free. Best when you expect to be in a higher bracket in retirement or want tax-free income in retirement.
Account type
Taxable: capital gains taxed at sale.
Inflation
Inflation rate3% is the historical US average. At 3%, $1 today is worth about $0.74 in 10 years and $0.55 in 20 years.
Real valueThe inflation-adjusted chart shows what your balance is actually worth in today's dollars. This is the number that matters for retirement planning: not the nominal balance.
Compound Interest & Real Return Calculator: Results
Nominal balance
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After-tax value
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Real value (today's $)
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Total contributed
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Total gain
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Purchasing power lost
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Nominal (compound)
After-tax value
Real value (inflation-adj.)
Simple interest
This calculator is for educational and informational purposes only. Results are estimates based on the inputs you provide and should not be taken as professional advice. Tax treatment depends on your individual circumstances and jurisdiction. Past returns do not guarantee future results: the historical 7% figure for a diversified US stock portfolio is an average, not a guarantee. Always consult a qualified professional for decisions involving investments, taxes, or financial planning.
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Go deeper on Compound Interest
Quizzes, guides and answers built to go with this calculator.
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Watch nowFAQs
5 common questions, answered
- What is compound interest?
- What is the difference between nominal and real return?
- How are taxes handled?
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Articles 2
Videos 1
A 75 second explainer: divide 72 by your interest rate to see roughly how many years it takes money to double, why the same math makes card debt grow fast, and why starting early beats a higher rate. Try it on the Compound Interest and Rule of 72 calculators.
Music: "Wholesome" by Kevin MacLeod (incompetech.com), licensed under CC BY 4.0.
Frequently asked questions
What is compound interest?
Compound interest means you earn returns on your past returns, not only on the money you put in. Over long periods the growth on earlier growth becomes the largest part of the balance, which is why starting early matters more than almost any other choice.
What is the difference between nominal and real return?
Nominal return is the growth you see on your statement. Real return removes inflation, so it shows what the money can actually buy. A 7% nominal return with 3% inflation is roughly a 3.9% real return, and the calculator shows both.
How are taxes handled?
You can choose a tax-deferred or taxable account. In a taxable account the calculator applies your tax rate to the gains at the end, which is a simplification: real taxable accounts also lose a little each year to taxes on dividends and distributions.
What return should I assume?
Many planners use about 6% to 7% nominal for a stock-heavy portfolio and less for a mix with bonds. Returns vary a lot year to year, so test a cautious and an optimistic rate rather than relying on one number.
When are contributions added?
Contributions are added at the end of each year, and growth compounds annually. That makes the results slightly conservative compared with investing each month.
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