The short answer
$10,000 to start plus $500 a month at 7% for 20 years grows to $302,370.09 nominally. After 3% inflation, that's worth $167,414.99 in today's dollars — a $134,955.10 gap. After 15% capital gains tax on the $172,370.09 in gains, the after-tax balance is $276,514.57. The nominal number and what you actually keep can look very different.
Key takeaways
- $10,000 + $500/month at 7% for 20 years reaches $302,370.09, with $130,000 from contributions and $172,370.09 from gains.
- Inflation at 3% shrinks that $302,370.09 to $167,414.99 in real purchasing power — the sticker number overstates what the money will actually buy.
- A 15% capital gains tax on the $172,370.09 in gains costs $25,855.51, leaving $276,514.57 after tax.
- The "CAGR" figure shown (18.58% in this example) is inflated by contributed principal — it is not the actual annual return, which stays the 7% you entered.
Where the growth actually comes from
On $10,000 initial plus $500/month for 20 years at 7%, the final $302,370.09 splits cleanly into two sources:
Total contributed: $130,000.00 (the $10,000 start plus $120,000 in $500 monthly deposits)
Total investment gains: $172,370.09
Final balance: $302,370.09
Gains outweigh contributions here — more than half the final balance came from growth, not from money deposited. That split is a useful sanity check on any long-horizon projection: if gains are a small share of the total, the plan is leaning heavily on saving; if gains dominate, it's leaning heavily on the assumed rate of return actually showing up.
Inflation and taxes: the two haircuts on nominal growth
The $302,370.09 headline number is nominal — it doesn't yet account for two things that quietly erode it:
Inflation-adjusted value (3% over 20 years): $167,414.99
Capital gains tax owed (15% of $172,370.09 in gains): $25,855.51
After-tax nominal value: $276,514.57
These two adjustments answer different questions and shouldn't be added together: the inflation figure shows what the nominal balance is worth in today's purchasing power, while the tax figure shows what's left in future dollars after the IRS takes its share of the gains. Combining both mentally — a smaller after-tax balance that also buys less than it appears to — gives the most honest picture of the outcome.
Why the displayed CAGR isn't your real return
The CAGR figure on this page is calculated as (final balance ÷ initial investment)^(1/years) − 1. On the $10,000-to-$302,370.09 example, that comes out to 18.58%, even though the entered return was 7%.
CAGR shown: 18.58%
Actual annual return applied: 7%
The gap exists because CAGR compares the ending balance only to the initial lump sum, while the ending balance also includes $120,000 in new contributions that were never part of the initial amount. Those added dollars inflate the ratio without representing investment performance. For judging actual return quality, trust the rate you entered and the ROI figure (total gain versus total contributed) rather than this CAGR number whenever contributions are involved.
Related calculators
- Average Return Calculator — compute arithmetic vs geometric average return from a real series of periodic returns.
- Retirement Calculator — extend this same growth math into a full retirement withdrawal plan.
- Roth IRA Calculator — model tax-free growth instead of taxable capital gains.