How does the calculator find the monthly amount?
It starts from the goal and works back. First it sees what your starting amount grows to over the time horizon at the rate. Whatever is still missing is what your contributions have to cover.
In words: monthly amount = (goal − starting amount grown) × monthly rate ÷ ((1 + monthly rate)^months − 1). An annual rate becomes the equivalent monthly rate, (1 + annual rate)^(1/12) − 1, so 7% a year is about 0.565% a month. With a 0% rate, it's just what's missing divided by the number of months.
The contribution is rounded up to the cent so the balance doesn't land a cent short, which means the final balance can exceed the goal by a few dollars.
Results are nominal: no taxes, fees or inflation, and the same rate from start to finish.
How much to invest each month to reach $1 million?
Mostly it comes down to time. Starting from zero at a hypothetical 7% a year, the monthly amount to reach $1,000,000 is:
- 10 years: $5,846.19 a month, with $701,542.80 from your pocket and $298,458.12 in interest.
- 20 years: $1,970.31 a month, with $472,874.40 contributed and $527,129.60 in interest.
- 30 years: $855.11 a month, with $307,839.60 contributed and $692,171.02 in interest.
Going from 10 to 20 years cuts the monthly amount by about two thirds, and 30 years takes it to under a sixth of the 10-year figure. The longer the horizon, the more of the work shifts from your contributions to compounding.
10 years
- Per month
- $5,846.19
- Contributed
- $701,542.80
- Interest
- $298,458.12
20 years
- Per month
- $1,970.31
- Contributed
- $472,874.40
- Interest
- $527,129.60
30 years
- Per month
- $855.11
- Contributed
- $307,839.60
- Interest
- $692,171.02
These numbers depend on the rate. A lower rate means a higher monthly amount; use the rate you consider realistic, ideally with inflation already subtracted.
Once you know the amount, where should it go?
This calculator says how much to invest, not in what. To keep your portfolio on the mix you chose (stocks, international, bonds), each contribution should go to what's furthest below target. That's what Allocta works out: tell it how much you're investing this month and it shows how much goes into each holding. Because it only uses new money, there's nothing to sell, so no capital gains tax on a sale in a taxable account.
FAQ
How do I calculate how much to invest each month to reach a goal?
Work out what your starting amount grows to over the time horizon, then divide what's missing by the compound interest factor: monthly amount = (goal − starting amount grown) × monthly rate ÷ ((1 + monthly rate)^months − 1). The calculator does this and shows the result for several time horizons.
Which rate should I use?
One you consider reasonable for your case, ideally with expected inflation already subtracted. The rate is an assumption: no investment guarantees a return, and a lower rate means a higher monthly amount.
Are contributions made at the start or the end of the month?
At the end of each month. The first contribution starts earning the following month.
Does it account for taxes and inflation?
No. Results are before taxes and in nominal dollars. For a rough sense of buying power, enter a real rate with inflation already subtracted, and keep in mind that taxes on gains reduce the result.
What if I already have money invested?
Enter it under "Amount you already have". It grows alongside your contributions and reduces what's missing. If it alone already reaches the goal in that time, the calculator tells you no contributions are needed.
Calculate your next contribution in Allocta
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