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How the Rule of 72 Helps You Understand How Your Savings Can Grow

By Mike Morrison

Whether you’re participating in a 401(k) now or thinking about starting a plan soon, you’ve likely wondered what your retirements savings might look like down the road. Are you on track? Will these savings be meaningful?

It may seem as though there’s no way to tell how much money you’ll have in the future. Good news, there are some handy tools to help give you an idea. One of those tools is known as the Rule 72.

Here’s how the Rule of 72 works
Take the number 72 and divide it by your annual rate of return as a whole number (e.g 5% = 5) to estimate how many years it will take for your current 401(k) investment to double in value. It’s pretty simple math:

72 ÷ Annual Interest Rate = Years to Double the Amount You Currently Have

For example, let’s say you have saved $50,000 and your 401(k) holdings historically has a rate of return of 8%. 72 divided by 8 equals 9 years until your investment is estimated to double to $100,000. Note that this calculation only accounts for the growth on your current 401(k) balance, so you’re likely to double your balance even sooner if you continue to grow your balance by making regular contributions.

The Rule of 72 is also a good way to look at debt and why it is often super important to keep credit card debt paid off. A 20% interest rate on credit card balances can pretty quickly double your debt. The Rule of 72 suggests that only takes 3.6 years.

Please remember that this is an estimation tool. Markets at any point can vary dramatically from historical averages. Strong markets could shorten the time for your money to double, and down markets can push out this timing.

Why is Rule 72 an important tool to use?
A rule of thumb is that you’ll need 10 times your salary saved by age 67 in order to retire and maintain your current lifestyle. The Rule 72 can help you quickly see if you’re on track to meet that goal, or if you need to elevate your saving habits and/or consider your approach to investing. Most people will need to consider contributing 10%-15% of their salary over a career to reach the 10x salary goal.

What if I don’t know my rate of return?
Your retirement plan provider should have data available to show you how your 401(k) portfolio has performed over time. Or, you may want to consider historical data for your estimate: If you’re utilizing a moderate or aggressive investment portfolio, 7% - 10% is a good historical range to use. If you’re more conservatively invested in bonds, 2% - 5% is considered appropriate. Cash would be in more the 1%-3% range historically. Do know that invested cash is typically providing less than 1% in our current environment.

To save time on calculations, here are years to double using different rates of return.

Rule of 72 Calculations
Rate of Return Est. Years to Double Your Money
3% 24.0
5% 14.4
7% 10.3
10% 7.2
12% 6.0

What if I want to do more than just double my current retirement balance?
Not to worry – Rule 72 is just one of many tools that can help you plan for the future. For additional insight, check out our Savings Calculator. It allows you to estimate your future savings with more variables including your salary, wage increases, contribution percentages, years to retirement, and more that can help you consider scenarios to help you develop your plan to reach your goals.


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