Future Value Calculator

The future value calculator allows you to estimate the value that a sum of money can reach after several years. By entering the initial capital, interest rate and time period, the tool will calculate the amount taking into account compound interest.

This version also offers the possibility to add regular deposits or withdrawals, take inflation into account, apply tax rates on earnings or calculate backwards the required return or time period.

What is future value?

The future value is the amount to which a present investment will grow over time when it earns interest. It's based on the concept of the time value of money - a dollar today is worth more than a dollar in the future because you can invest it and earn interest. The compounding effect means that the longer the length of time, the greater the growth in the total amount, as each period's earnings generate additional earnings over time.

How to use this calculator:

Begin with the three main inputs: enter the starting capital, annual interest rate and term length, then select how often to compound. With these settings you'll get a clear forecast of your total capital. Next, activate any desired options. By adding regular cash flows, you can simulate monthly savings or pension payments, also setting their frequency and timing (start or end of the investment period).

If you enable inflation, results will be shown in today's money. Applying a tax rate gives an estimate of what amount is actually available to you. This calculator can also work backwards. Leave one of the four main fields blank and fill out the other three, and the tool will figure out the missing value, whether it's starting capital, interest rate or term length.

Formula understanding.

For larger amounts of capital, future value is calculated using the compound interest formula as follows:

PV is the present value, r is the annual interest rate in decimal form, n is the number of compounding periods per year, and t is the number of years. For example, if we invest $1,000 at an annual interest rate of 6 percent (i.e., six percent) compounded monthly for 10 years, then r = .06, n = 12, and t = 10.

If a certain amount is paid in at each point then this will create an annuity. The additional increase on every payment is as follows:

The table below shows each input parameter with examples.

Applications of future value

The future value helps answer everyday questions about money. You can predict how much your account will be worth in many years if you continue to contribute to a retirement account. If you leave an amount of principal alone, you can see how much it's worth at the end. You can also work backwards to figure out how long your savings will last if you withdraw regular amounts. Since all plans eventually lead to a final balance, different interest rates and time periods are directly comparable.

To make a meaningful forecast:

Use a realistic and defensible rate of return. Over the long term, broad market indexes have returned about 7 to 10 percent annually on an unadjusted basis. It makes sense to pick a value within that range as your starting point. The frequency of compounding should be adjusted for the account in question. For long-term investments, purchasing power is more important than the balance, so you should turn on inflation adjustment. Taxes and fees should be considered real costs that reduce what's left at the end.