How to Calculate the Rate of Return (IRR) on Your Investments

Published October 12, 2026

Free tool: IRR Calculator→

If you've been saving into an account for years, the balance alone doesn't tell you how well your money did, because part of it is what you put in. The internal rate of return (IRR) answers the real question: what yearly return turned your deposits into today's value? This guide explains how it works, using the free IRR Calculator.

What IRR means for your savings

The IRR is the single annual interest rate that, applied to every deposit from the day it was made, produces your final balance. It accounts for timing: money added recently has had less time to grow than money invested at the start.

Example: regular contributions

You started with $10,000, added $500 a month for 20 years, and now have $300,851:

• Total contributed: $10,000 + $500 × 240 = $130,000
• Total returns: $170,851
• IRR: 7.0% a year

Dividing the gain by the total contributed would suggest a much higher return, because it treats every dollar as if it had been invested for all 20 years. The IRR gives the fair yearly figure.

A smaller example: $5,000 to start plus $200 a month for 10 years, ending at $40,000, is an IRR of about 5.3%.

A single lump sum

With no contributions, IRR is the same as the compound annual growth rate. Money that doubles from $10,000 to $20,000 in 10 years grew about 7.2% a year with annual compounding, or 7.0% quoted as a rate compounded monthly. It's the same growth quoted two ways; see CAGR Formula Explained.

Comparing your return

Compare your IRR with a benchmark over the same period, such as a broad stock index fund or a savings rate. If your actively managed account earned 5% while a simple index fund earned 7%, that's a meaningful gap after 20 years.

Uneven or irregular cash flows

This calculator assumes equal monthly contributions. For projects or investments with different amounts each year, such as a rental or a business, the NPV Calculator finds the IRR of any series of yearly cash flows; see How to Calculate NPV.

How to use the IRR Calculator

1. Open the IRR Calculator.
2. Enter your initial investment and your monthly contribution.
3. Enter the future value, your balance today or your target, and the number of years.
4. Leave compounding on monthly when you have monthly contributions. With a lump sum only, choose how you want the rate quoted.
5. Read the results: the future value, the total returns and the IRR, with a chart of growth over time, the split between contributions and returns, and a yearly breakdown.

Frequently asked questions

What is IRR in simple terms?

The yearly rate of return that turns everything you invested, at the times you invested it, into your final value. $10,000 plus $500 a month that grows to $300,851 in 20 years is a 7.0% IRR.

Is IRR the same as average return?

No. An average of yearly returns ignores when you added money. IRR weights each deposit by how long it was invested, so it reflects your actual experience.

What is a good IRR?

It depends on the risk. Over long periods, US stocks have returned roughly 10% a year before inflation, or about 7% after, while safe savings earn much less. Compare with a benchmark of similar risk.