How Monthly Compound Investment Works
This calculator uses the future value of an annuity formula: FV = PMT ร ((1+r)^n โ 1) / r, where PMT is your monthly contribution, r is the monthly return (annual rate รท 12), and n is total months. The power of compound interest means the longer you invest, the more your gains outpace your contributions.
$300/Month Contribution โ Final Value by Scenario
| Period | 3% Return | 5% Return | 7% Return |
|---|---|---|---|
| 10 years | $41,929 | $46,574 | $51,776 |
| 20 years | $98,866 | $123,368 | $153,889 |
| 30 years | $174,547 | $249,679 | $355,909 |
Over 30 years at 7%, investing just $300/month turns $108,000 in contributions into over $355,000 โ more than 3x your money. This is why starting early and being consistent matters far more than the amount you start with. Even modest contributions benefit enormously from time in the market.
Frequently Asked Questions
Both work well for regular monthly investing. Roth grows tax-free (you pay tax now, withdraw tax-free), while Traditional defers taxes (you get a deduction now, pay tax on withdrawals). Your future vs. current tax rate expectation should guide the choice.
This is called sequence-of-returns risk. To protect against it, consider holding 1โ2 years of expenses in cash so you do not have to sell investments at a loss during early retirement downturns.