Compound Growth and Retirement Planning
See how time, recurring contributions and assumed returns interact in long-term retirement projections—and why projections are not guarantees.
Compounding rewards time
When investment gains remain invested, future returns can be earned on both prior contributions and prior gains. Over long periods, this compounding effect can become a major part of projected account growth.
Contributions are controllable
Market returns are uncertain, but contribution amount and frequency are variables you can influence. Modeling a range of contribution levels can be more useful than relying on a single optimistic return assumption.
Use multiple return assumptions
A calculator projection is a scenario, not a forecast. Test lower, middle and higher assumed returns, and consider inflation, investment fees and taxes where relevant. Real markets do not deliver a smooth fixed return every year.
Risk and time horizon belong in the plan
Asset allocation should reflect the investor’s objectives, ability to tolerate losses and time until funds are needed. Diversification can reduce some concentration risk but cannot prevent losses.
Educational information only. This article is not individualized financial, investment, tax or legal advice and is not a lender or issuer offer. Review current disclosures from the relevant financial institution before making a decision.