One of the most basic retirement calculators is one that tells you how much money you’ll have after a certain period of time at a specific interest rate. This is a pretty common calculator to find on any financial website, and the basic formula is even built into Microsoft Excel.
Since the calculator is so common, I never created one for this site. It’s actually a calculator I rarely use. Part of the reason is because I use spreadsheets to track how much I plan to invest. Imagine trying to predict how much you’ll invest into a Roth IRA over 40 years. It would be hard to calculate this using a calculator as the contribution limit changes sporadically. With a spreadsheet I can run a few scenarios, perhaps increasing the contribution limit $500 a year every 5 years to see the impact that would make on my account balance.
But I do think there are places for an investing calculator, which is why I went ahead and created this one. The basic information to enter is the amount you want to contribute today (this can be your existing account balance), the interest rate you expect to get (I default to 7%), and how long your money will grow. You can optionally input how much additional money you’ll contribute each month.
Calculators like this are useful for demonstrating the power of compound interest. Imagine giving $1,000 to a newborn. When the child turns 18, the account could have $3,512.54. If the money sits untouched until retirement at age 67, it could be worth $107,379.98.
Say you have a mortgage payment of $1,300 a month. You have an extra $100 you can either invest, or use to pay down your mortgage. With a 4% interest rate on your mortgage, which should you do? This calculator shows you that $100 a month over 30 years could leave you with $122,708.75 if you invest it. If you put it towards your mortgage, you’d pay your mortgage off 3 years and 9 months early, saving $28,340.
While a compound interest calculator is one of the most basic personal finance calculators available, it is a handy tool to see the impact of time on both saving and spending.