See how your money multiplies over time using the power of compound interest.
Albert Einstein famously called compound interest the "eighth wonder of the world." It is the principle where you earn interest not just on your original money (principal), but also on the interest that money has already earned.
The chart above demonstrates the "hockey stick" growth curve. Notice how the green line (total value) starts close to the white dotted line (principal) but separates drastically over time. This separation is your money working for you.
This calculator includes a "Passive Income" metric based on the 4% Rule. This rule of thumb suggests that you can withdraw 4% of your portfolio in the first year of retirement (adjusted for inflation thereafter) with a high probability of never running out of money over a 30-year retirement.
Historically, the S&P 500 has returned about 10% annually before inflation. When adjusting for inflation (to see your purchasing power), a rate of 7-8% is often used for long-term projections.
This calculator assumes interest is compounded monthly, which is standard for most savings accounts and investment projections that involve monthly contributions.
In the early years, your principal does most of the heavy lifting. It typically takes 7-10 years for your "Interest Earned" to start exceeding your annual contributions. Patience is key.