Compound Interest Guide: Better Forecasts, Fewer Surprises
Compound interest is simple math with huge long-term consequences. Small changes in rate, contribution behavior, and time horizon can produce very different outcomes.
What drives the result most
- Time in market (years invested).
- Rate assumption realism (conservative vs optimistic).
- Contribution discipline (if applicable).
How to model responsibly
- Run a base case, conservative case, and optimistic case.
- Check nominal and inflation-adjusted outcomes.
- Review yearly instead of trusting one long-range guess.
Common mistakes
- Using one aggressive return assumption for all plans.
- Ignoring taxes and fees.
- Confusing fixed-rate projection with market behavior.