Roth IRA Calculator

How Investment Growth Is Calculated

Investment accounts grow through compound interest — your returns earn returns. Unlike simple interest (where you only earn on the principal), compounding means that every dollar of gain becomes part of the base that earns the next round of gains. The longer the time horizon, the more dramatic the effect.

The Compound Interest Formula

A = P(1 + r/n)^(nt) + PMT × [((1 + r/n)^(nt) − 1) / (r/n)]

• P = Starting balance (principal)
• r = Annual interest rate (as a decimal)
• n = Compounding frequency (12 for monthly)
• t = Time in years
• PMT = Regular monthly contribution

How to Use This Calculator

1. Enter your starting balance (or $0 if starting from scratch)
2. Enter your expected annual return rate (7–10% is a common long-term stock market assumption)
3. Enter your monthly contribution
4. Set the number of years until you plan to withdraw
5. Click Calculate to see projected balance and growth breakdown

The Power of Starting Early

Investing $300/month starting at age 25 at 8% annual return gives you ~$1,006,000 by age 65.

Starting at 35 with the same $300/month: ~$440,000 — less than half, even though you only missed 10 years.

Those 10 years cost you $566,000 in future value, even though the missed contributions were only $36,000. That gap is the compounding effect in action.

Important Caveats

Investment returns are not guaranteed. Stock market returns vary year to year — 8% is a long-term historical average for diversified index funds, not a promise. Tax-advantaged accounts (401k, IRA, Roth IRA) shelter gains from annual taxation, which can significantly increase real returns compared to a taxable brokerage account.