19 Apr How long will it take to double my retirement savings?

Q. What is the Rule of 72?
— Investor

A. Ah, yes, the Rule of 72.

This is a calculation to help you estimate how long it will take to double your money.

It’s a simple formula, said Jeanne Kane, a certified financial planner with JFL Total Wealth Management in Boonton.

“Divide 72 by your interest rate and you get the number of years it takes for your money to double,” she said.

For example, she said, a balanced stock portfolio that returns 7.2% per year will double in 10 years. Take 72 and divide it by 7.2 and you get 10 years.

If your savings don’t have a high return, it could take a very long time to double your money.

“Conservative investors are in for a rude awakening if they are only invested in money markets or Certificates of Deposit (CDs),” Kane said. “In the past, these investments provided stability and a small return. However, today these same investments now return only a tiny fraction.”

For example, according to Barron’s, money market accounts were paying 0.08% as of April 5.

Using that number, it would 900 years for a money market investor to double their money.

If your funds were all in 12-month CDs paying 0.19%, it would take 379 years for the money to double, Kane said.

“If you are only invested in these types of conservative investments, you’re effectively losing money,” she said. “That’s because your investments aren’t even keeping up with inflation, currently at 1.7%. That’s more than double what you can make in a money market account.”

Email your questions to .

This story was originally published on April 19, 2021.

NJMoneyHelp.com presents certain general financial planning principles and advice, but should never be viewed as a substitute for obtaining advice from a personal professional advisor who understands your unique individual circumstances.