What the investment calculator does
An investment plan has five parts: the starting amount, the regular contributions, the return rate, the time and the end amount. Enter any four and this investment calculator finds the fifth. Choose a tab for the part you want to find:
- End amount — how much your money grows to.
- Contribution — how much to add every month or year to reach a target.
- Return rate — the yearly return needed to reach a target.
- Starting amount — how much to invest today.
- Investment length — how many years it takes to reach a target.
Investment growth formula
- End amount FV = P × (1 + i)n + C × ((1 + i)n − 1) / i, where P is the starting amount, C the contribution, i the rate per period and n the number of periods. Contributions at the beginning of each period are multiplied by (1 + i) once more.
- Monthly rate i = (1 + r / k)k / 12 − 1 for a yearly rate r compounded k times a year: the calculator works month by month at the rate that matches the chosen compounding.
- Contribution needed = (target − P × (1 + i)n) / (((1 + i)n − 1) / i).
- Starting amount needed = (target − growth of the contributions) / (1 + i)n.
- Return rate and length have no simple formula, so the calculator tries values until the end amount matches the target.
Example
$20,000 invested at 6% compounded annually, with $1,000 added at the end of every month, grows to $198,290.40 in 10 years. You put in $140,000, and $58,290.40 is the return. Adding the money at the beginning of each month instead gives $199,081.24. To reach $1,000,000 with the same plan, you would need:
- a contribution of $5,934.40 a month for 10 years, or
- a starting amount of $467,670.46, or
- a return of 32.594% a year, which is unrealistic, or
- more time: 28.8 years at 6%.
End balance by return rate
$20,000 to start and $1,000 a month, compounded annually:
| Return | 10 years | 20 years | 30 years |
|---|---|---|---|
| 2% | $156,977 | $323,951 | $527,491 |
| 4% | $176,301 | $407,664 | $750,139 |
| 6% | $198,290 | $517,581 | $1,089,383 |
| 8% | $223,303 | $662,218 | $1,609,804 |
| 10% | $251,739 | $852,809 | $2,411,831 |
Over long periods the return rate matters more than anything else: 30 years at 10% gives more than twice as much as 30 years at 6%.
How long it takes to reach $1,000,000
With $20,000 to start and a 6% return:
| Monthly contribution | Years to $1,000,000 |
|---|---|
| $500 | 37.7 |
| $1,000 | 28.8 |
| $2,000 | 20.4 |
| $3,000 | 16.0 |
What return rate to use
- Savings accounts, CDs and bonds pay a fixed rate: use the APY you are offered.
- Stock funds go up and down. Over the long run U.S. stocks have returned roughly 10% a year before inflation, or about 6% to 7% after it, but some years lose money, so use a conservative average.
- Fees come straight off the return. On the example plan over 30 years, a 1% yearly fee cuts the end balance from $1,089,383 to $901,815, a loss of $187,568.
- Inflation lowers what the money buys. Use a rate after inflation to see the result in today's dollars, or check it with the inflation calculator.
To measure what an investment actually returned, use the average return calculator or the ROI calculator.
Why starting early matters
$500 a month at 6% for 40 years grows to $953,839; the same amount for 30 years grows to $487,256. Ten more years of saving add only $60,000 of contributions but almost double the result, because the early money has the longest time to compound.
For a plan with taxes and inflation, the interest calculator adds both. For retirement savings, see the retirement calculator, the 401(k) calculator and the Roth IRA calculator.