Compound Interest Guide
How to Choose an Interest Rate Assumption
Learn how to choose a reasonable rate for a compound interest estimate without making the projection misleading.
Match the rate to the asset
A savings account, CD, bond fund, stock fund, and retirement portfolio can have very different return expectations. The rate should match what the user is trying to model.
Using a stock-like return for a savings account would make the estimate misleading.
Avoid one perfect number
No one knows future returns with certainty. A single rate can make the future look more predictable than it is.
Use lower, base, and higher scenarios to understand a range of possible outcomes.
Review assumptions over time
Rates change, markets change, and personal goals change. A projection made today may need to be updated later.
The calculator is most useful when users revisit assumptions instead of treating the first result as final.