A $500 monthly contribution doesn’t sound like much on its own. Over 25 years at a 7% average annual return, it — combined with a modest starting balance — can grow into a genuinely large number, almost entirely because of compounding, not because of the size of any individual contribution.
Our Retirement Savings Calculator projects exactly that: enter your current balance, monthly contribution, years until retirement, and an expected annual return, and it shows the future value, how much of that is money you actually put in, and how much is growth.
Two calculations, added together
The projection is really two separate future-value calculations combined:
- Your current balance, compounding on its own — a lump sum growing at your expected rate, compounded monthly, for the whole time horizon.
- Your future monthly contributions, compounding as they go in — modeled as an ordinary annuity, since each contribution starts compounding from the month it’s made, not from day one.
Add those two numbers together and you get the total projected balance at retirement.
Why “compounded monthly” matters
The calculator divides your annual return percentage by 12 to get a monthly rate, then applies that rate every month rather than once a year. This matches how real investment accounts actually accrue and reinvest — small monthly compounding adds up to noticeably more than compounding once a year at the same headline annual rate, especially over multi-decade horizons.
A concrete example
Starting with $20,000, contributing $500/month, for 25 years at 7% annual return: the calculator shows a future value of roughly $519,500. Of that, $170,000 is money you actually contributed ($20,000 initial + $500 × 300 months), and the remaining ~$349,500 is pure compound growth — more than double what you put in.
What this doesn’t model
This is a simplified, pre-tax projection. It doesn’t account for employer matching (add that to your monthly contribution manually if you want it reflected), doesn’t model different account types (401k vs. Roth IRA vs. taxable brokerage each have different tax treatment), and treats the annual return rate as fixed rather than variable — real markets don’t return a constant 7% every single year, even if that’s a reasonable long-term historical average for a diversified portfolio.
Try it yourself: Retirement Savings Calculator.