How this calculator works
This calculator uses monthly compounding to model your investment growth. Each month, your current balance grows by your annual return rate divided by 12, and your monthly contribution is added. This closely mirrors how index funds and retirement accounts grow over time.
The 7% historical return benchmark
The S&P 500 has returned roughly 10% per year on average historically — about 7% after adjusting for inflation. Using 7% as a default gives a reasonable, inflation-adjusted estimate for a diversified stock portfolio held long-term. More conservative portfolios (bonds + stocks) might use 4–5%.
Monthly contributions matter more than timing
Trying to time the market rarely beats consistent monthly investing. A person who contributes $500/month for 30 years at 7% ends up with significantly more than someone who invested a lump sum and stopped. Consistency compounds. See also our compound interest calculator for savings-focused scenarios.
Paying off debt vs. investing
If you have high-interest debt, paying it off first is often the better "investment." A 20% credit card rate is a guaranteed 20% return when you pay it off. Use our debt payoff calculator to plan your path to debt freedom before investing heavily.
Frequently asked questions
What is a good investment return?
The S&P 500 has historically returned about 10% per year, or ~7% after inflation. A diversified long-term portfolio targeting 6–8% annually is considered realistic and solid.
What is CAGR?
CAGR (Compound Annual Growth Rate) is the steady annual rate that would produce the same final value as the actual path of your investment. It is the best single number for comparing investment performance across different time periods.
How much do I need to invest to become a millionaire?
At 7% annual return, contributing $500/month starting from zero reaches $1 million in about 34 years. Starting with $10,000 gets you there about 2 years sooner. Starting earlier is far more powerful than contributing more.
How does inflation affect my returns?
Inflation erodes purchasing power. A 10% nominal return with 3% inflation gives a real return of about 7%. To see inflation-adjusted results, subtract your expected inflation rate from the annual return you enter.
Should I invest or pay off debt first?
If your debt rate exceeds your expected investment return, pay off debt first. High-interest debt (18%+) should almost always be cleared before investing. Low-interest debt like a mortgage is closer to investment returns, so doing both simultaneously often makes sense.