Compounding means that you keep earning interest or growth on the interest or growth you've already earned. If you have $2,000 in your 401k account and it grows by 8 percent, you end up with $2,160. If you just got 8 percent on the same $2,000 in the second year, you'd get another $160, giving you $2,320. This calculator assumes that your return is compounded annually and your deposits are made monthly. The actual rate of return is largely dependent on the types of investments you select. The Standard & Poor's 500® (S&P 500®) for the 10 years ending Dec. 1st, 2014, had an annual compounded rate of return of 8.06%,