Compound Interest Calculator

Simple interest is calculated only on the original principal. Compound interest is calculated on the principal plus any interest already earned. For example, with $1,000 at 10% simple interest, you earn $100 every year. With compound interest, you earn $100 in year one, then $110 in year two (because the $100 interest from year one is now also earning interest).

It matters, but less than you might think for typical savings rates. Going from annual to monthly compounding on a $10,000 balance at 5% over 10 years adds about $120 to the final result. Where frequency really matters is at higher rates or over very long periods.

Use the APY (Annual Percentage Yield) shown on your account, not the APR. High-yield savings accounts in 2024–2025 often offer 4%–5% APY. Traditional savings accounts at major banks often pay less than 0.5%.

To find the inflation-adjusted (real) return, subtract the annual inflation rate from your nominal rate. For example, if your savings earn 5% and inflation runs at 3%, your real return is approximately 2%. The calculator doesn't adjust for inflation automatically — enter your real rate if you want inflation-adjusted results.

Yes, this gives a useful rough estimate. For a more complete retirement plan, you'd also need to account for inflation, taxes, social security income, and changing contribution amounts over time. Use this as a starting point to understand the impact of starting early versus waiting.

Because of how compounding accelerates in later years. The interest earned in years 20–30 of a 30-year investment is usually far larger than in years 1–10, even if contributions are the same throughout. A few extra years at the beginning have a disproportionately large effect on the final balance.