How retirement compound growth is calculated

What this projection is (and is not)

A retirement savings projection estimates a future balance from starting savings, contributions, an assumed annual return, optional yearly contribution increases, and inflation you enter.

Investment returns are uncertain. A projection is not a guaranteed balance or income figure.

Run scenarios in the retirement savings calculator. Coverage-need estimates are a different problem — see the life insurance needs calculator.

Horizon and monthly compounding

years = retirementAge − currentAge (must be greater than zero).

Each month the MVP models:

1. monthlyRate = (expectedAnnualReturn ÷ 100) ÷ 12
2. monthlyContribution = annualContribution ÷ 12
3. balance = balance × (1 + monthlyRate) + monthlyContribution

Order matters: grow the balance, then add the contribution. If expected return is 0%, the balance simply rises by contributions.

Contribution growth and inflation

If you enter an annual contribution increase, the annual contribution rises once per year on the anniversary — not every month.

Inflation-adjusted (“today’s dollars”) value:

realValue = nominalBalance ÷ (1 + inflationRate)^years

where inflation is expressed as a decimal in the formula (for example, 2.5% → 0.025). Nominal and inflation-adjusted figures are not interchangeable.

What the MVP deliberately omits

This MVP does not invent a withdrawal-rate or income-replacement figure (for example, it does not apply an undocumented “4% rule”). Fees, taxes, and contribution limits are also not modeled unless later specified.

Assumptions

• Expected return and inflation are constant user assumptions
• Monthly compounding of the expected annual return
• No fees, taxes, or contribution limits in this MVP
• Total contributions exclude starting savings; estimated growth = nominal balance − starting − contributions

Limitations

• Investment returns are not guaranteed
• Ignores sequence-of-returns risk, fees, and taxes
• Inflation-adjusted value is a purchasing-power estimate, not a second cash account

Takeaways

Compound growth here is month-by-month arithmetic under your return and contribution assumptions. Change those assumptions and the path changes — without the tool claiming the future will match the projection.