Compound interest is the engine behind every long-horizon investment plan. Unlike simple interest — which pays only on the original principal — compound interest pays interest on the interest you have already earned, which itself then earns more interest. Over a 30-year horizon at a 7% nominal return, roughly 80% of the final balance comes from compounding, not from the contributions themselves.
Compounding frequency matters
The SEC's Investor.gov calculator lets you choose annual, semi-annual, quarterly, monthly, or daily compounding — and so does this one. The more often interest is credited and reinvested, the higher the effective annual rate (EAR). On a $100,000 portfolio over 30 years at a 7% nominal rate, the difference between annual compounding (EAR 7.00%) and daily compounding (EAR ~7.25%) is roughly $40,000 of final value. Match the cadence to your actual account: bank savings typically compound daily, bonds semi-annually, and equity index funds are well-modeled by monthly compounding.
Rate variance bands — stress-testing your assumption
Single-point projections are misleading because nobody knows what the next 30 years of returns will look like. The variance band shows you the same scenario at, for example, 5% / 7% / 9% — so you can see the realistic spread of outcomes. A $500/month contribution over 30 years at a base 7% return reaches ~$612k; at 5% it's ~$416k and at 9% it's ~$921k. The same inputs, just a different assumption about the future.
Real returns and the inflation tax
Nominal returns flatter you. Real returns tell you what you can actually buy. At a 3% long-run inflation rate, a 7% nominal return is only a 3.9% real return. On a 30-year horizon, a $1,000,000 nominal portfolio is worth only about $412,000 in today's purchasing power. The inflation toggle here overlays the real-return curve on top of the nominal — use it to check whether your number is actually large enough.
Tax drag in a taxable account
In a taxable brokerage account, dividends and realized gains are taxed every year, which reduces the base that compounds forward. A 15% effective annual tax drag turns a 7% gross return into roughly 6% net. On a $100,000, 30-year horizon, that's the difference between $761,000 and $574,000 of final value. Tax-advantaged accounts (401(k), Traditional or Roth IRA, 529, HSA, ISA, SIPP) eliminate this drag and are the right home for long-horizon money — use the tax-drag slider here to see exactly what that costs you.
The multi-currency dimension
If you live, save, or report in more than one currency — and millions of people do — your real return is the local-currency return adjusted for long-run FX drift. The Multi-Currency Portfolio panel below lets you split contributions across up to five currencies and see, in your home currency, how forward FX shifts add or subtract from your final value. This is the single biggest gap in every US-only compound interest calculator.
What this calculator does not do
This is a deterministic projection — not a Monte Carlo simulation, not a financial plan, and not investment advice. Real markets deliver sequence-of-returns risk, drawdowns, dividend cuts, sector rotations, and black-swan events that no closed-form calculator captures. Use this tool to compare scenarios and stress-test assumptions, not to predict the future.