The Rule of 72 is a quick method that can allow anyone to quickly compute how long it will take for their money to double. This is an especially handy tool to have for anyone who is saving for their retirement. It doesn’t matter whether you are trying to figure out the doubling effect on stocks, bonds or real estate it works perfectly every time.
The formula works like this:
The number of years it takes for your money or investment to double = 72 divided by the return on your investment.
For example, if you have $50,000 of your money in a self-directed IRA that is invested in real estate that is earning you a return of 9% it would take 8 years for you $50,000 to double in value (72/9 =8).
In forty years your initial investment of $50,000 would be worth a whopping $1,600,000 assuming you did not touch the money and your return on investment remained constant over the 40 year time frame. Read the rest of this entry
IRA contributions is one of the best ways for you to build a large retirement nest egg. Below are four ways that contributing to an IRA can benefit you.
1) Compound Interest + Tax Deferred Profits = Lasting Wealth
Compound interest when understood and used properly is the most powerful force on earth. Here’s why. Compound interest occurs when you not only earn interest on your original investment sum, but also on the interest earned on the original sum.
For example, beginning at age 25, you take $4 you spend each day for coffee and put it towards retirement. At that rate, you’d save $121 a month. If you received 9% in compounding interest each year, you’d have $23,415 after 10 years. After 20 years, you’d have $221,520 and after 30 years, when you are 55, you’d have an amazing $566,440.
The power of compound interest is multiplied in tax-advantage accounts, such as IRAs. For example, if you were to contribute $4,000 a year to a tax-advantaged account (such as an IRA) and assume an 8% compound interest rate of return for 30 years, you self-directed IRA would be worth $449,133 at the end of year 30. Read the rest of this entry
The Rule of 72 is a quick method that can allow anyone to quickly compute how long it will take for their money to double. This is an especially handy tool to have for anyone who is saving for their retirement. It doesn’t matter whether you are trying to figure out the doubling effect on stocks, bonds or real estate it works perfectly every time.
