Compound Interest Example
7% Compound Interest — The Stock Market Average
How money grows at 7% (historical stock market real return) over various time horizons.
Scenario
7% is the historical inflation-adjusted return of the S&P 500 index.
Inputs
Rate7%
CompoundingAnnual (real return)
Results
$10k for 10 years$19,672
$10k for 20 years$38,697
$10k for 30 years$76,123
$500/month for 30 years$606,438
Explanation
7% is often cited as the long-run real (inflation-adjusted) return of US stock market index funds. At this rate, $10k doubles roughly every 10 years. $500/month for 30 years crosses $600k — a solid retirement nest egg for many.
Key Takeaways
- Low-cost index funds (0.03% expense ratio) maximize the full 7%.
- Consistency — not timing — is what captures this average.