What this calculator does
The calculator turns the usual question around. The compound interest calculator tells you what your monthly savings turn into in 20 years. Here, instead, you set the target amount and get the point in time. The default is the first million, but you can enter any other sum. If your target year is already fixed, the savings-to-a-million calculator calculates the reverse.
You get four figures: the years to target, the calendar year in which you reach the target, your payments up to then and the share that comes from the return.
How I calculate it
I go month by month and check after each month whether the target amount has been reached. As an example I use the defaults: $25,000 starting capital, $500 monthly savings, a 7% annual return and a target of $1,000,000.
Step 1: Convert the annual return to a monthly rate. The monthly return is not simply 7 divided by 12. Because of compounding, twelve months at 0.5833% each give 7.23% a year, which is more than the 7% you entered. That is why I convert geometrically. 7% a year becomes 0.5654% a month. Twelve such months give exactly 7%.
Step 2: Calculate the first month. The $25,000 grows by 0.5654%. That is $141.35 in return. At the end of the month, $500 of monthly savings is added. You are at $25,641.35.
Step 3: Repeat. In the second month, the return is earned on $25,641.35, no longer on the original $25,000. The return rises to $144.98, the capital to $26,286.33. This very effect is what makes the calculation speed up later.
Step 4: Stop as soon as the target is reached. In month 402, the portfolio exceeds one million for the first time. That is 33.5 years. If you start in January 2026, this month falls in the year 2059.
Step 5: Split the result. By then you have paid in $226,000, namely $25,000 starting capital plus 402 times $500. The portfolio holds $1,005,745.20. The difference of $779,745.20 comes from the return. So of every dollar at the target, you paid in a good 22 cents yourself.
The million comes at the end, not at the beginning
With the same inputs, the intermediate targets look like this:
| Target amount | Years until then | Target year |
|---|---|---|
| $100,000 | 7.6 years | 2033 |
| $250,000 | 16.2 years | 2042 |
| $500,000 | 24.3 years | 2050 |
| $750,000 | 29.6 years | 2055 |
| $1,000,000 | 33.5 years | 2059 |
The first $100,000 takes 7.6 years. The last $250,000 takes 3.9 years. After 20 years, just under 60% of the way, only $350,510.30 is in the portfolio. That is a good third of the target.
After ten years, only $134,704.65 is in the portfolio, a good 13% of the target. If you give up in disappointment at this point, you throw away the most valuable part of the journey. The last stretch contributes the most, because that is where the largest capital is working.
What is often overlooked
Tax can push the date back. The calculator works gross. If returns are taxed every year, less money is left to compound and the journey to the million takes longer. If tax is only due when you sell, the portfolio grows faster, but part of the gain goes to taxes at the end. Which applies to you depends on the country you live in. Check the rules where you live, or ask a tax advisor.
Inflation takes almost half of the target. A million in the year 2059 is not a million of today. At 2% inflation per year, it corresponds to around $515,000 in today’s purchasing power. If you want to calculate in today’s purchasing power, subtract the expected inflation from the return. 7% return and 2% inflation become 4.9%. With this value, the journey to the million takes 42.2 years instead of 33.5.
The return is the assumption with the biggest impact and the least control. At 5%, it takes 41.6 years in the example, at 9% only 28.3 years. There are 13.3 years between the two values. You cannot control this very assumption. Your monthly savings you can.
Money paid in early weighs more than money paid in late. $25,000 more starting capital shortens the journey from 33.5 to 30.5 years, by exactly three years. $50 more monthly savings shortens it by one year, and over the 32.5 years until then you pay in $19,500 for this. Similar amounts, very different effects. The reason is time. The starting capital works from the first month, the last monthly payment for only one month.
The calculator assumes a savings plan without disruptions. It assumes that you pay in every month, never withdraw anything and that the return is the same every year. Reality brings job changes, car repairs and stock market years with losses of 30%. Costs are missing too. You can see how strongly ongoing fees affect the result in the ETF savings plan calculator.
How to use the calculator sensibly
Calculate three versions instead of one: a cautious one at 5%, a middle one at 7% and an optimistic one at 9%. The range of results is more honest than a single year.
Then turn the question around. Set a year that fits your life, and raise the monthly savings until it is reached. Without starting capital and at a 7% return, it looks like this:
| Time to the million | Required monthly savings |
|---|---|
| 40 years | $405 |
| 35 years | $585 |
| 30 years | $856 |
| 25 years | $1,278 |
| 20 years | $1,971 |
Each decade less time costs a little more than double the monthly amount. That is the price of lost years, and it cannot be made up later.
Also set yourself intermediate targets. Enter $100,000 as the target amount instead of a million. In the example, you reach this mark after 7.6 years, and you can check it. A number that is 33 years away hardly motivates anyone. If you want to derive your target from your actual monthly spending, start with the financial independence calculator. The guide Live off your investments connects this target figure with health insurance, taxes, a later pension and reserves. What the million yields per month in retirement, you can then work out with the retirement withdrawal calculator.
If the target cannot be reached
The search runs for at most 80 years. If the target amount is not reached by then, all four result lines show zeros. This happens, for example, with monthly savings of $0 and a 0% return, or with a permanently negative return. The zeros are not a calculation error. They mean that with these inputs there is no point in time at which the target is reached. Then the next question is not the target date but the monthly savings.