Learn How Compound Interest Affects Your Financial Planning


– What is compound interest?

– Total simple interest earned vs. total compound interest earned: big difference.

– Compound interest formula.

– The importance of compounding period.

– Questions to ponder.

To understand the power of compound interest, take a look at the difference in savings if you start saving now or in 10 years.

For example, calculate the annual income you will receive after retirement with the beginning balance of $1,000.

Let’s assume that:

Calculate the Annual Income You Will Receive After RetiremYour Interest Rate: 8%Annual Contribution: $500Annual Income: $10,000Present Age: 35Retirement Age: 45Age At Which Retirement Withdrawals Will End: 85Inflation Rate: 3%

You will get the following results in 10 years:Beginning Balance: $1000.00Interest Rate: 8%Annual Contribution: $500.00Number of Years Contributing: 10Number of Years Withdrawing: 40Inflation Rate: 3%Annual Income: $586.70

Retirement Saving Schedule for 10 yearsSaving Period    Deposit    Balance             1             $500.00    $1580.00            10            $500.00    $9402.21

Retirement Withdrawl Schedule for 10 yearsWithdrawl Period    Withdrawal    Balance            1                       $-788.47    $9365.91           40                      $-788.47    $0.00

Save your time and calculate your retirement savings online.

If you are trying to pay off your debt, you can use our calculator to see how much money you will save by either getting a lower APR or paying it off in larger chunks.

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Written by KatrinD

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