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Easy Financial Math! Thumbnail

Easy Financial Math!

Thinking about retirement? Trying to decide when or if you'll have enough money? Here's a quick financial tip that you can use right this minute. It's called the Rule of 72.

What is the Rule of 72?

The Rule of 72 is a simple way to determine how long an investment will take to double given a fixed annual rate of interest. And it goes like this:

Say you have $100,000 in your 401K plan and it has averaged a 6% return over it's life. How long until you double your money? You simply take 72 divided by the rate of return and that's how many years it will take. Example 72/6 = 12. In 12 years you would have doubled your money or have $200,000 based on this rule. (It will be considerably more than this if you keep investing during the 12 years).

Let's say your rate is a whopping 10%. You would take 72/10 = 7.2. It would only take you 7.2 years to double your money. (It will be considerably more than this if you keep investing during the 12 years).

It works in every situation and with every investment and it's easy. No complicated equations.

You need a plan

A goal of retiring - without a plan to get there - is simply a plan to never retire. Retirement isn't some magical age. It's a dollar amount. If you're age 50 or over and still in the accumulation phase (pre-retirement) we can help you figure out where you need to go and how to get there. If you are retired or nearing retirement, we can create a plan which will outpace inflation and possibly leave a legacy to your family. The consultation is free and without obligation. Contact us to set up a consultation.

For more articles about retirement planning and investing, click here.

Thanks for reading!

Brian Coleman/Retirement Income & Investment Planner

80/20 Financial Services is an independent Registered Investment Advisory Firm. We help clients age 50 and over plan their retirement income and investment strategies. Contact us today for help with your retirement needs.