How the calculation works
The balance grows at the selected compounding frequency. The calculator converts that growth into an equivalent monthly step and adds each contribution after that month’s growth.
Worked example
With a $20,000 starting balance, $1,000 contributed at the end of each month, a 7% nominal annual return, monthly compounding, and a 10-year horizon, the calculator separates the final result into the money contributed and the growth produced by the model.
How to choose a return assumption
Use several scenarios rather than treating one percentage as a forecast. A lower case, base case, and higher case make the range of possible outcomes clearer. Historical market averages do not account for your taxes, fees, asset allocation, or future market conditions.
What this estimate leaves out
Returns do not arrive smoothly. Market losses, inflation, taxes, investment fees, and contribution changes can materially alter the outcome. Contributions made at the beginning of each month would produce a slightly higher value than the end-of-month assumption used here.
Reference: U.S. SEC Investor.gov Compound Interest Calculator. Full assumptions are documented in the Richerly Tools methodology.