Retirement Plans and the Power of Exponential Growth

Jackie Bedard
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Attorney, Author, and Founder of Carolina Family Estate Planning

You may be surprised to learn that an Individual Retirement Account (IRA) that is currently worth $350,000 could potentially provide $1 million or more to your family. Supercharge Your IRA

If it took your entire lifetime to accumulate your retirement accounts worth $350,000; $500,000; or more, then it might be mind-boggling to consider that those accounts could be worth millions.  But that, my friends, is the beauty of exponential growth.

Have you ever heard of the “Rule of 72”?  It’s a little math and investing trick for estimating how long it will take for an investment to double in value. If you divide the number 72 by your estimated rate of annual growth, the result is roughly how long it would take your investment to double.

For example, consider an estimated annual growth rate of 6%. Divide the number 72 by 6, and the result is 12. At a 6% growth rate, an investment will double in about 12 years. The Rule of 72 is a handy tool to quickly figure out how long or what interest rate it will take to achieve your financial goals.

So, let’s look at a few examples in action:

Let’s assume you are 50 years old. The following table shows the projected growth of your IRA accounts if you were earning an estimated annual rate of return of 6%:

Current Value

Age 62 (12 years)

Age 74 (24 years)

$200,000

$400,000

$800,000

$500,000

$1,000,000

$2,000,000

$750,000

$1,500,000

$3,000,000

$1,000,000

$2,000,000

$4,000,000

$1,500,000

$3,000,000

$6,000,000

However, keep in mind that the table above is a bit of a simplification because the IRS will require you to take Required Minimum Distributions starting at age 70 ½, but the general idea is that exponential growth can be extremely powerful. Even between the ages of 70 ½ and 74, the Required Minimum Distributions are less than 6%, so your account could still be growing substantially.

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