General Interest Calculator
Project compound growth while accounting for inflation and taxes. Choose compounding intervals from daily to continuous compounding.
Real Value (Adjusted for Inflation): $179,686
Growth Specifications
Recurring Contributions & Market Drags
| Year | Starting Balance | Deposit Added | Interest Earned | Tax Paid | Ending Balance | Real Value |
|---|---|---|---|---|---|---|
| Year 1 | $10,000 | +$6,000 | +$1,055 | -$158 | $16,897 | $16,485 |
| Year 2 | $16,897 | +$6,000 | +$1,627 | -$244 | $24,280 | $23,110 |
| Year 3 | $24,280 | +$6,000 | +$2,240 | -$336 | $32,184 | $29,886 |
| Year 4 | $32,184 | +$6,000 | +$2,896 | -$434 | $40,646 | $36,823 |
| Year 5 | $40,646 | +$6,000 | +$3,599 | -$540 | $49,705 | $43,932 |
| Year 6 | $49,705 | +$6,000 | +$4,350 | -$653 | $59,403 | $51,223 |
| Year 7 | $59,403 | +$6,000 | +$5,155 | -$773 | $69,785 | $58,707 |
| Year 8 | $69,785 | +$6,000 | +$6,017 | -$903 | $80,899 | $66,398 |
| Year 9 | $80,899 | +$6,000 | +$6,940 | -$1,041 | $92,798 | $74,306 |
| Year 10 | $92,798 | +$6,000 | +$7,927 | -$1,189 | $105,536 | $82,444 |
| Year 11 | $105,536 | +$6,000 | +$8,984 | -$1,348 | $119,173 | $90,827 |
| Year 12 | $119,173 | +$6,000 | +$10,116 | -$1,517 | $133,771 | $99,466 |
| Year 13 | $133,771 | +$6,000 | +$11,328 | -$1,699 | $149,400 | $108,378 |
| Year 14 | $149,400 | +$6,000 | +$12,625 | -$1,894 | $166,131 | $117,576 |
| Year 15 | $166,131 | +$6,000 | +$14,014 | -$2,102 | $184,043 | $127,075 |
| Year 16 | $184,043 | +$6,000 | +$15,500 | -$2,325 | $203,218 | $136,893 |
| Year 17 | $203,218 | +$6,000 | +$17,092 | -$2,564 | $223,747 | $147,045 |
| Year 18 | $223,747 | +$6,000 | +$18,796 | -$2,819 | $245,723 | $157,549 |
| Year 19 | $245,723 | +$6,000 | +$20,620 | -$3,093 | $269,250 | $168,423 |
| Year 20 | $269,250 | +$6,000 | +$22,573 | -$3,386 | $294,437 | $179,686 |
How Compound Interest Accumulates
Unlike simple interest, which is calculated solely on the initial principal, compound interest accrues on the principal plus all interest already earned. This creates a compounding effect that curves upward over time.
The Mathematics of Compound Growth
Standard compound interest uses the formula:
Where A is the future value, P is the starting principal, r is the annual interest rate, n is the compounding frequency per year, and t is the term in years. For continuous compounding, the formula becomes:
Accounting for Tax Drag and Inflation
Real wealth creation requires looking beyond nominal figures:
- Tax Drag: If you invest in a taxable account, taxes are deducted from interest gains, lowering the rate at which you compound interest. Our tool deducts tax yearly to simulate taxable brokerage accounts accurately.
- Inflation Drag: Inflation erodes the purchasing power of your money over time. A nominal balance of $100,000 in 20 years is worth less in today's dollars. Our solver calculates the discounted purchasing power based on your inflation expectation.
Frequently Asked Questions About Interest
What is compound interest?
Compound interest is interest calculated on the initial principal, which also includes all of the accumulated interest from previous periods. Unlike simple interest, it grows exponentially over time because you earn interest on interest.
How does tax drag affect compound interest?
Tax drag refers to the reduction in investment growth caused by annual tax liability on earned interest or dividends. By paying tax annually rather than deferring it, you reduce the capital available for future compounding, slowing portfolio growth.
How does compounding frequency impact returns?
The more frequently interest compounds, the faster your investment grows. Daily compounding yields slightly more interest than monthly compounding, which in turn beats quarterly and annual compounding, because interest is added back to capital faster.
Can this handle tax drag on investments?
Yes. Apply custom tax rates to calculate after-tax investment growth with daily to continuous compounding.