Two forces, one number

Your assets grow from exactly two sources: money you add and returns on money already there. Early on, the first dominates. Later, the second takes over — and that crossover is where most long-term wealth actually comes from.

Simple interest grows linearly: 100 at 7% earns 7 every year, forever. Compounding grows geometrically, because each year’s return is calculated on a bigger base. That single difference is the whole story.

The formula this calculator uses

end of year = start of year × (1 + return rate) + money added

Two modelling choices are worth being explicit about, because they change the answer:

  • Returns are calculated on the balance at the start of the year — that is what makes it compound.
  • Money added during the year does not earn a return until the following year. This is the conservative assumption. If you invest monthly, reality will be slightly better than the projection.

You can run the numbers yourself in the asset growth calculator — everything happens in your browser.

A worked example: 10 + 10 a year at 7%

Start with 10 (think: 10k), add 10 every year, earn 7% a year.

Year Start of year Return Added End of year
1 10.00 0.70 10.00 20.70
2 20.70 1.45 10.00 32.15
3 32.15 2.25 10.00 44.40
4 44.40 3.11 10.00 57.51
5 57.51 4.03 10.00 71.53
6 71.53 5.01 10.00 86.54
7 86.54 6.06 10.00 102.60
8 102.60 7.18 10.00 119.78
9 119.78 8.38 10.00 138.16
10 138.16 9.67 10.00 157.84

After ten years you contributed 100 and ended with 157.84 — so 47.84, just under a third of the final balance, came from returns rather than your own money.

The interesting part: year 11

In year 1, returns contributed 0.70 against 10 of deposits — about 7% of the growth. By year 11, the annual return (11.05) exceeds the whole year’s contribution (10.00).

That is the moment compounding stops being a rounding error and starts being the main engine. Everything after it is a different kind of game: your portfolio grows even in years when you add nothing.

The rule of 72

A useful mental shortcut: divide 72 by the annual return to get the approximate doubling time.

Return Doubling time
3% ~24 years
7% ~10.3 years
10% ~7.2 years

It is approximate, and it ignores additions — but it calibrates your intuition fast. A “safe” 3% and an aggressive 10% are not 3× apart in outcome; they are decades apart.

Small rate differences are enormous over long horizons

Same inputs (start 10, add 10 a year), 20 years, only the return rate differs:

Return Final assets Contributed From returns
5% 357.19 200.00 157.19
10% 640.02 200.00 440.02

Same effort, nearly double the outcome. This is why fees of “just 1%” are not a detail over 30-year horizons — they are a permanent tax on the compounding base.

Inflation is the assumption people forget

Run 30 years with 10 a year:

Assumption Final assets
10% nominal return 1,819.43
7% (10% minus ~3% inflation) 1,020.73

The “real” number is roughly half. If you want to know what the money will actually buy, subtract expected inflation from the return before you enter it.

Four assumptions that quietly break projections

  1. Using nominal returns and calling it wealth. Subtract inflation.
  2. Ignoring taxes and fees. In taxable accounts, the drag is permanent.
  3. Assuming a smooth return. Markets do not deliver 7% every year; a 30% drawdown in year 3 changes behaviour far more than the math suggests.
  4. Forgetting that contributions stop. Job loss, childcare, a house purchase — most people’s savings rate is not constant for 30 years.

None of that makes the projection useless. It makes it a best case, which is exactly how you should read it.

How to use the calculator well

  1. Enter your current assets, not your goal.
  2. Use a conservative return (5–6% real is a common planning figure).
  3. Add savings growth if you expect raises.
  4. Run it twice — once at 5%, once at 8% — and plan against the lower one.
  5. Re-run it once a year. The projection is a compass, not a promise.

Try it: Asset Growth Calculator. It runs entirely in your browser, stores nothing, and works offline.

FAQ

What is a realistic return rate? Historically, broad equity indices have returned roughly 7–10% a year before inflation and taxes, with large drawdowns along the way. For planning, many people use 5% real. Your own number should reflect your actual asset mix.

Is the return calculated monthly or yearly? Yearly, on the balance at the start of each year. Monthly investing would do slightly better; annual compounding keeps the model readable.

Should I include my pension? Yes — add its current value to the starting balance and blend its expected return into the rate.

Does this account for withdrawing money later? Not directly. Run the accumulation phase, then use the final number as the starting point for a withdrawal projection.

This article is educational and is not investment advice. Return assumptions are yours to choose and will determine the result.