Future value
What money today, or a series of deposits, grows to by a future date at a given rate of return.
FV = PV × (1 + r)^t
Explanation
Future value (FV) takes an amount today and grows it forward at a rate of return for a number of periods. Because each period’s growth builds on the previous total, future value rises faster over time instead of in a straight line. This is compounding at work.
When you add regular contributions, each deposit has its own future value depending on how long it is invested. Adding them up gives the future value of an annuity (a series of equal payments), which is the usual case for retirement saving.
In scenarios, every projected balance is a future value. The app applies a return each year (or each month), adds your contributions, and subtracts fees and withdrawals. Keep in mind that a future value in nominal dollars is not the same as its buying power; the app can also show results in today’s dollars by adjusting for inflation.
Example
You have $20,000 invested and expect 6% a year for 25 years.
- Growth factor: 1.06^25 = 4.2919
- Future value: $20,000 × 4.2919 = $85,837
Now suppose instead you invest $500 a month for 30 years at 7% a year, compounded monthly (r = 0.07 ÷ 12 = 0.005833, n = 360 months):
- FV = $500 × ((1.005833)^360 − 1) ÷ 0.005833
- (1.005833)^360 ≈ 8.1165, so FV ≈ $500 × 7.1165 ÷ 0.005833 ≈ $609,985
You contributed $180,000 in total; the remaining $429,985 is growth.