Where the $343,778 comes from
The sample plan starts with $10,000, adds $500 at the end of every month, earns 8% a year, and runs 20 years. You put in $130,000. Growth supplies the other $213,778, so 62% of the final balance is money you never deposited.
Read the growth line, not the balance. Year 1 earns $1,055. Year 20 earns $26,095, more than 4 years of deposits in a single year. In year 8, growth ($6,328) passes the $6,000 you add each year for the first time. From then on, returns build the balance faster than your paycheck does.
The flip side: the early years are mostly your own money. Stop at year 5 and growth accounts for 23% of the balance. Compounding pays late, so the years you skip at the end cost more than the years you skip at the start.
The formula, written out
Balance = P × (1 + r)ⁿ + D × ((1 + r)ⁿ − 1) ÷ rPstarting balance, $10,000 in the sampleDmonthly deposit, $500rmonthly rate, the yearly return ÷ 12 (8% ÷ 12 = 0.667%)nnumber of months, 240
The calculator steps through the plan one month at a time instead of plugging into the closed formula. A yearly raise changes D every twelve months, and the formula has no slot for a deposit size on the move. With the raise at 0%, both methods give the same answer to the cent.
End of month or start of month
Deposits land at the end of each month by default, which matches most payroll and auto-invest schedules. Switch to start of month and each deposit gets one extra month of growth. On the sample plan the gap is $1,963 over 20 years. Pick the one matching your real schedule and move on.
Why monthly compounding
An 8% yearly return split into twelve monthly steps comes out a little above 8%. Left alone for 20 years, $10,000 reaches $49,268 with monthly compounding and $46,610 with yearly compounding. Stock and bond funds pay no fixed interest at all. Their price moves every trading day, so neither number is "correct". Monthly steps line up with monthly deposits, which is why this page uses them.
Picking a return rate you can defend
The return rate moves the result more than any other input. Enter a rate before inflation here and set inflation in its own box. Entering an after-inflation rate and inflation too counts inflation twice.
| Where the money sits | Planning rate | Why this range |
|---|---|---|
| Savings or money market account | Today's APY | Rates follow the central bank and reset without notice. Fine for 1 to 3 years, risky to assume for 20. |
| Short-term government bonds | 3% to 4% | Low swings, low growth. Roughly keeps pace with inflation. |
| 60/40 stock and bond fund | 5% to 6% | Bonds pull the average down and soften the bad years. |
| Global stock index fund | 6% to 8% | Long-run stock returns, trimmed for today's higher valuations. |
| S&P 500, past results | About 10% | The average since 1926 before inflation, about 7% after. A record, not a forecast. |
The calculator opens at 8%, the top of the stock range. Treat that as the hopeful case and run the plan again at 6%. On the sample plan, 6% ends at $264,122 and 10% ends at $452,965. The gap between those two guesses, $188,843, is larger than every dollar you deposit. Plan on the low figure. Treat anything above it as a bonus.
A 1% fee is one eighth of an 8% return
Funds and advisers charge a percentage of your balance every year. The charge comes out whether the market rose or fell, and the money it removes stops compounding. This page subtracts the fee from the return, so 8% with a 1% fee runs as 7%.
Same deposits, same market. The higher fee costs $40,617 over 20 years. Stretch the plan to 30 years and the gap grows to $154,249. An adviser who keeps you invested through a crash earns part of that back. One who picks funds for you and checks in once a year rarely earns all of it. Look up the expense ratio on your fund's fact sheet and enter it in the Yearly fee box.
Two inputs most investment calculators skip
Inflation
$343,778 twenty years from now buys less than $343,778 today. At 2.5% yearly inflation, prices climb enough to shrink the sample total to $209,798 in today's money, a 39% cut in buying power. The US Federal Reserve, the Bank of England, and the European Central Bank all target 2%. Using 2.5% to 3% leaves room for years above target. Set the box to 0 to see the plain number.
A yearly raise to the deposit
Most people invest more as their pay rises. A 3% yearly raise turns the $500 deposit into about $877 by the final year. The sample plan then ends at $415,803, with $171,222 deposited. Matching a raise to inflation keeps your deposit's real size flat. Anything above inflation is new saving.
Where this projection goes wrong
- Returns arrive smoothly. Real markets drop 20% or more in some years. A crash in year 19 hurts far more than one in year 2, because the balance is largest near the end. A steady-rate projection has no way to show this sequence risk.
- No tax. In a taxable brokerage account, dividends and sold gains lose a share every year. A 401(k), IRA, or UK ISA defers or removes the tax. Every figure here is pre-tax.
- No withdrawals or contribution limits. The plan only adds money. A retirement income drawn from the balance needs a drawdown plan, not a growth projection. Retirement accounts also cap yearly deposits, which this page does not check.
- Currency is a label. Switching to INR or EUR changes the symbol and digit grouping only. No exchange rates, no country-specific returns.
- 60 years at most. Past that, the rate you guess today says almost nothing about the result.