How the return is calculated
The annual percentage is treated as a nominal rate and split evenly across the compounding periods you pick. Monthly compounding uses one-twelfth of the annual rate each month. Quarterly uses one-quarter, four times a year. Annual compounding applies the full rate once a year.
Future value = starting balance × (1 + r)n + contribution × ((1 + r)n − 1) / r
Here r is the rate for one compounding period, and n is the number of periods. The contribution in that formula is the amount added at the end of a period: one month of contributions if you compound monthly, or three months added together if you compound quarterly. If the rate is zero, the balance is simply the money you put in.
A worked example
Start with 10,000, add 200 at the end of every month, and earn 7% a year compounded monthly for 20 years. You put in 58,000 in total. The estimated balance is 144,572.72, so growth accounts for 86,572.72. At 2% inflation, that ending balance has about the buying power of 97,293.30 in today's money. Press “Reset to the worked example” to load those inputs. The same steps run for every other currency label.
You can compare the idea with the compound-interest calculator published by the U.S. Securities and Exchange Commission's investor education site, Investor.gov. A few dollars of difference is normal if the other calculator adds contributions at a different point in the month.
What a single annual rate leaves out
Markets do not pay the same percentage every year. A 7% figure is a long-run illustration, not a forecast. Fees, taxes, contribution gaps, and the order of good and bad years all move a real balance. A loss early on, while the balance is still small, does less damage than the same loss near the end, when there is more money exposed to it. This page applies one rate the whole way through, so it cannot show that pattern.
Inflation is handled the same way: the buying-power column divides each year's ending balance by (1 + inflation)year. It does not model rising contributions, rising spending, or tax brackets.
Choosing a rate without pretending it is a promise
Broad stock markets have historically outpaced cash over long periods, and they have also spent years below a smooth average. A lower rate is a useful stress test. Try the same plan at 4% and at 7% and treat the gap between them as the uncertainty, rather than treating either figure as the outcome you will get.