Direct answer: Understand compounding periods, contributions, effective growth, and why assumptions matter.
The core idea
With simple interest, growth is calculated only on the original principal. With compound interest, each period begins with a balance that can include earlier growth. The repeated multiplication creates exponential rather than linear growth.
Reading the formula
For a lump sum, future value is P(1+r)ⁿ. P is the starting principal, r is the rate for one compounding period, and n is the number of periods. Regular end-of-period contributions use an annuity factor and are added to the lump-sum future value.
Contribution timing matters
Money deposited at the start of a period receives one more period of growth than money deposited at the end. Our calculator states that monthly contributions occur at month-end so the result is reproducible.
Use scenarios, not predictions
An estimated return is not a guarantee. Compare conservative, central, and optimistic rates, then include fees, tax, inflation, and irregular contributions in your real plan.
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Editorial note
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