How the Millionaire Calculator Works

Summary

The millionaire calculator projects how long it will take for your savings and investments to reach a target amount — typically one million pounds. It combines compound interest on your existing savings with regular monthly contributions to find the month when your portfolio crosses the finish line.

How it works

Wealth grows through two forces working together:

1. Compound interest — your existing balance earns returns, and those returns themselves earn returns in subsequent months
2. Regular contributions — each monthly deposit adds to the base that compounds

The calculator iterates month by month, applying the monthly return rate to the running balance and adding the monthly contribution. It stops when the balance reaches or exceeds the target amount.

This is a nominal return projection — it does not subtract inflation or taxes from the return rate. A separate inflation-adjusted purchasing power estimate is shown alongside the result.

The formula

To find how many months until FV reaches the target, the calculator iterates:

balance = PV
for each month:
    balance = balance × (1 + r) + PMT
    if balance >= target: stop

This iterative approach gives the exact month the target is reached, including any overshoot.

Worked example

Inputs explained

• Current savings / investments — your starting portfolio value. This is the principal that begins compounding immediately.
• Monthly contribution — the amount you add each month. Contributions are modelled as being made at the end of each month (ordinary annuity).
• Expected annual return — the nominal annual return rate before inflation. A common benchmark is 7% for a diversified equity portfolio (long-term historical average for global equities).
• Current age — used to calculate the age at which you reach your target.
• Target amount — the wealth goal, defaulting to £1,000,000.

Outputs explained

• Target age — the age at which your portfolio first exceeds the target amount
• Years to target — the number of years from today
• Total contributed — initial savings plus all monthly contributions made until the target is reached
• Investment growth — the difference between the final balance and total contributions (i.e., compound interest earned)
• Milestones — intermediate wealth milestones (£100k, £250k, £500k, etc.) and the age/year at which each is reached
• Growth chart — a visual projection of total portfolio value versus contributions over time

Assumptions & limitations

• Nominal returns only — the return rate is not adjusted for inflation. The calculator provides a separate inflation-adjusted purchasing power estimate assuming 2.5% annual inflation.
• Constant return rate — real markets are volatile. This model assumes a fixed annual return compounded monthly, which smooths out year-to-year fluctuations.
• No taxes modelled — investment gains may be subject to capital gains tax or income tax depending on the account type (ISA, SIPP, GIA). Using tax-sheltered accounts (ISA, SIPP) means the nominal projection is closer to reality.
• No fees modelled — fund management fees (typically 0.1–0.5% for index funds) reduce the effective return. Subtract your expected fees from the return rate for a more accurate projection.
• Contributions at end of month — the model uses ordinary annuity timing. Contributions at the start of the month (annuity due) would reach the target slightly sooner.
• 100-year cap — the iteration stops at 1,200 months (100 years). If the target is unreachable within this horizon, the calculator shows the maximum projection.

Verification