Score: 4.7/5 (61 votes)

According to Standard and Poor's, the average annualized return of the S&P index, which later became the S&P 500, from 1926 to 2020 was 10%. **At 10%, you could double your initial investment every seven years** (72 divided by 10).

With that 10 percent average annual return, **one can double their money in about seven years**, Cramer said. “The magic of compounding works best the younger you are, because that means you have more time for your money to grow,” Cramer said.

This means, at a **10%** fixed annual rate of return, your money doubles every 7 years.

The Rule of 72 is a simplified formula that calculates how long it'll take for an investment to double in value, based on its rate of return. The Rule of 72 applies to compounded interest rates and is **reasonably accurate for interest rates that fall in the range of 6% and 10%**.

In fact, **a good 51% of Americans say $100,000 is the savings amount needed to be financially healthy**, according to the 2022 Personal Capital Wealth and Wellness Index.

- Focus on growth industries and stocks. The world economy is changing at a rapid pace, with some industries expanding and others contracting. ...
- Buy dividend stocks. ...
- Invest in ETFs. ...
- Buy bonds and bond ETFs. ...
- Invest in REITs.

Since it takes about **11 doubles** to reach $1 million, you'd have to find 11 stocks that double to get you to your goal. This is a risky strategy that has a highly unlikely outcome, but it's certainly possible. One path to $1 million is to invest in a boom-or-bust field, such as oil and gas speculation.

Here's how the Rule of 72 works

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.

Retirement experts have offered various rules of thumb about how much you need to save: **somewhere near $1 million, 80% to 90% of your annual pre-retirement income, 12 times your pre-retirement salary**.

That being said, although each 401(k) plan is different, contributions accumulated within your plan, which are diversified among stock, bond, and cash investments, can provide an average annual return ranging from **3% to 8%**, depending how you allocate your funds to each of those investment options.

“The longer you can stay invested in something, the more opportunity you have for that investment to appreciate,” he said. Assuming a 7 percent average annual return, **it will take a little more than 10 years for a $60,000 401k balance to compound so it doubles in size**. Learn the basics of how compound interest works.

**Your 401(k) can absolutely lose money**. Your 401(k) funds are invested in various funds like mutual funds, index funds, and target-date funds. Because these funds are invested in the stock market, either entirely or partially, they can gain value and lose value based on the performance of the stocks they're exposed to.

We saw in the previous section that investing in the S&P 500 has historically allowed investors to **double their money about every six or seven years**. Your initial $1,000 investment will grow to $2,000 by year 7, $4,000 by year 14, and $6,000 by year 18.

If you want to double your money in five years, divide 72 by five. According to the Rule of 72, it would take about **14.4 years** to double your money at 5% per year.

Currently, money market funds pay between 0.85% and 1.05% in interest. With that, you can earn between **$85 to $105** in interest on $10,000 each year.

Recommended 401k Amounts By Age

Middle age savers (35-50) should be able to become 401k millionaires **around age 50** if they've been maxing out their 401k and properly investing since the age of 23.

- Have Multiple Income Streams. ...
- Save as Much as You Possibly Can. ...
- Make Savings Automatic. ...
- Keep Debt to a Minimum. ...
- Don't Fall Victim to 'Shiny Ball Syndrome' ...
- Keep Cash in Interest-Bearing Accounts. ...
- Invest Your Raises.

- Put money in a high-yield savings account. ...
- Pay off high-interest debt. ...
- Max out your individual retirement account (IRA) ...
- Fund a Health Savings Account (HSA) ...
- Save for education costs with a 529 account. ...
- Open a taxable investment account. ...
- Build a CD ladder.

On the 30^{th} day it would be worth an astounding $5,368,709! If the penny were to be allowed to double for another 30 days, the penny would grow to **over $5 quadrillion** (five thousand trillion!) dollars.

But all the same, **100k in retirement can last up to 30 years if you stick to the general 4% thumb rule of financial planning during retirement**. This rule suggests that retirees 65 and older should withdraw at most 4% of their savings during the first year of retirement.

If you have $100,000 to invest for income, you can earn **anywhere from a fraction of a percentage point to as much as nearly 10%** on your money. Some interest-earning investments are guaranteed safe by the U.S. government, others are subject to market fluctuations.

- Give some of it away. ...
- Pay off debt. ...
- Build your emergency fund. ...
- Pay down your mortgage. ...
- Save for your kids' college fund. ...
- Enjoy some of it.