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#1 by valerie » Sun Jun 02, 2019 12:27

From Google search:

Does money double every 7 years?

'The Rule of 72 states that the amount of time required to double your money equals 72 divided by your rate of return. For example: If you invest money at a 10 percent return, you will double your money every 7.2 years. ... If you invest at a 7 percent return, you will double your money every 10.2 years.'
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#2 by Darkstar2 » Mon Jun 03, 2019 14:06

valerie wrote: From Google search:

Does money double every 7 years?

'The Rule of 72 states that the amount of time required to double your money equals 72 divided by your rate of return. For example: If you invest money at a 10 percent return, you will double your money every 7.2 years. ... If you invest at a 7 percent return, you will double your money every 10.2 years.'

If only the rate of return was stable - not anymore, now we are into volatile territory thanks to trade wars this trade wars that, wars, federal reserve, and overall bad news (bad numbers from jobs and economy) and other fears.....Now we are more into correction territory and solid markers for a deep recession. Those who are young and have money invested and 10 or more years from retirement, should not worry, but those who are approaching retirement or already in it, it's going to be a big F headache unless people have a cushion (employer pension, on top of the government pension, + savings, and not just rely on the 401k and other investments, because things are really going to get ugly soon, and most people don't have 5 figures in their 401k. You'd need nowadays at least 2-3 millions BARE MINIMUM to secure a half decent retirement, but chances are most people will outlive their savings, they will likely lose it all or most of it before things get better, so once you reach the retirement years and have no income coming in, it's hard to see your money double, not in today's context.

For those still working, things have been difficult lately, thins were at a loss in 2018, picked up in 2019, and now all gains are going down the toilet because of the trade war mostly, all the gains from Q1 2019 are being eaten away, so yeah it's hard to imagine a rate of return stable enough to double your money within 7-10 years, not at the way things are headed.

As far as rate of return, there are some gains some losses, the true rate of return is the median I believe, include all gains and loss and average out, if you have enough money you can cover your losses, unfortunately it is not the case for everyone. A 20% market correction due to recession is a killer if you are in retirement, you still have to survive and withdraw money so your capital goes down and keeps going down, so it will take fare more % gains to recuperate your losses, and then you have the issue of inflation - factor in the power of the same money within a 10 year span, did you really DOUBLE your money ? not quite, because in 10 years the power of spending of your money has gone down which can negate most of the gains - in other words you will need MORE money to spend for the same services, this is why in old days people could buy cars for 4 figures, and the same car now is worth 5 figures, only with shoddy construction to boot. So your money might increase in value over the years, but is it keeping up with inflation.....that's the question.

I would not be surprised to see the dow go as low as 20k or lower if this damn nonsense continues and a recession to add insult to injury - how many years will it take to recover and for dow to reach current levels, and not just Dow but all other markets, so I do not believe that in the 7-10 years people will have doubled their money, considering we are edging very close to a recession, one that could have been avoided !

Those who still are WORKING and keep putting money aside for retirement I would not worry, though I would not be confident your money will DOUBLE within 7-10 years, doubling of money means nothing if its power will diminish year to year due to inflation, higher cost of living, etc. People think that the claim to have at least 2-3 millions in 401k is over exagerated, but no it isn't. Whilst it seems you will not need that money, it matters, because it accounts for inflation, corrections and market falls, you need to have more money than you actually need in order to pad for losses or you are f*****. Normally the formula is about 30 times your annual salary in 401k to secure a good retirement, BUT, I'd go as far as adding 1 million to that formula, for cushion.

The fact that your money can double in 7-10 years is an illusion. In 10 years your money may have 30% less spending power. Cost increases, but do salaries keep up with inflation, not a chance. Only the upper rich class gets away with huge bonuses and millions in secured pensions and severances completely decimating the middle class families, so you either are going to be very poor or very wealthy in the end.

Some people can opt to BUY life annuities and get GUARANTEED annual returns in the 3%-4% range perhaps or opt for less risky portfolios and settle for low single digit returns, that does not cut if you factor in the inflation that simply is not enough.

Those glory years of 2 digit % year returns are long and gone, if you invested 20-30 years ago or more, chances are you MORE than doubled your money. Especially those who bought property, now property is so high and not affordable and bubble is likely to burst. You have old homes in sh*tty conditions being sold for millions requiring tons of repairs and maintenance. New homes are not built like they used to, new construction is not as solid.

Don't forget that you have to also pay taxes on your 401ks at retirement age where you have to withdraw money every year, so that single low digit yearly return won't get you anywhere. You need MINIMUM wealth to secure a good retirement - the word "DOUBLE" is just a word it means nothing concretely. How much is that electricity going to cost you in 7-10 years ? How much is your clothing, groceries, property tax, tax, going to cost you in 10 years ? People are delusional to think their income will keep up with inflation, if only it did our world would be so much better, but that is not reality. Some people have only 100k-200k in their 401k and they think they are wealthy YIKES ! God help them.
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#3 by valerie » Mon Jun 03, 2019 20:21

That is the 72 rule and I think it is rather correct but do keep in mind, as it states,
it is an example.

Even if you double your money in 7 years, would you still be alive? :roll:

Maybe I shouldn't be so negative when it comes to retirement years but I can't
help but realize how fast the years go by.

Let's just say I live to be 83. That is only 20 more years.

What I am saying, a lot of people think or feel they need hundreds of thousands
of dollars for retirement. Well sure that is nice to say the least but I think it
depends on their situation. If they are a retired married couple, they may be
receiving $4,000 per month social security, one or both might have a pension too,
their house is paid for, they have everything they could ever need and mostly
whatever they want. Does this couple need hundreds of thousands of dollars for
retirement? Might be nice. Good to have money. Realistically, they probably will
not need it and it will go to either their children, nursing home, or the city.
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#4 by wildbillhickok » Tue Jun 04, 2019 14:31

Talking about money and investment... First, in my humble opinion, It depends on how much money you already have, if you start from zero, and you have to pay expenses saving and investing will be a challenge. Second interest rates that banks pay provide marginal gains/corrections.

But, in other hand, if you are savvy and like to take risks you can try the stock market, there is even stock market simulators like investopedia, which i never tried because this is far from my reality, I live in Brazil :geek: ,

But, I repeat this is just my opinion, I think that investing our precious economies in the stock market in a potental corrupt country is taking too much risk, predicting the market moves is challenging enough, but now add this to a possibly corrupt system that can produce a scandal of corruption or even a tragedy caused by greed and completely disregard for the rules and regulations to make more profit, the price can plunge from one day to another and all the money be lost.

Letting aside the pontential traps, finance is a very important topic, I surely will study more. To survive in the concrete jungle we need to manage well our resources indepently of much we have. :thumbup:
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#5 by Darkstar2 » Tue Jun 04, 2019 15:53

valerie wrote: That is the 72 rule and I think it is rather correct but do keep in mind, as it states,
it is an example.

Even if you double your money in 7 years, would you still be alive? :roll:

I'd like to think most of us here will, unless we have mostly people in their 100's (like Tasman1 :lol: )
So odds are many of us here will be alive in 7 years. It does not matter if our money doubles, that is just its VALUE
that will double, not its POWER. VALUE increases but POWER decreases, so in the end the doubling factor is just an illusion. Can you safely say that the money in 7 years will have the same spending power ? Certainly not.
HOWEVER, keep in mind this - there is something interesting here, it's not all negative. Compounding ! So if you are not retired and not withdrawing your money, it is saved and the money keeps growing. Aside from the % gains you make on your investment, these are compounded ! So when you make returns those are added to your principal, and then any future gains % will be on the investment that was already increased due to earnings, so the earnings compound the same way your interest % compounds with your bank savings. This is how you can double or triple your money over the years - NOW for those who will retire in 20-30 years, calculate inflation on those years. It's nice to have wealth when you retire, but with inflation accumulated over the years, the power of that money will be greatly diminished, which is why you will need a cushion and far more wealth to cover this.

It does not matter of you will be alive in 7 years, hopefully most people have a will in good order, so the money will go to their family, kids, etc, and hopefully not to the greedy government. :D

Quote:
Maybe I shouldn't be so negative when it comes to retirement years but I can't
help but realize how fast the years go by.

Retirement is not a bad thing for some but it depends. Statistically, and sadly, most people will not have enough in their 401k to survive a decent retirement, they will outlast their 401k and savings. Some people are lucky enough to have jobs with pension plans, so on top of your 401k you have an annuity you receive for life, which for many people can be enough to cover them. Some people have interesting pension plans earning them more money than when they worked, so they are set for life, their 401k becomes a secondary income. Unfortunately if 401k is your primary and you have nothing else, then you are subject to fluctuating market value, unless you decide to buy in an annuity with low % paid for life or term, there are pros and cons to that, basically you would lose your entire capital if you take annuities, so you no longer have access to emergency funds if you need them, and in the US if you need emergency medical treatment / surgeries, some can run you in the 5-6 figures. So a good formula for 401k is having 30 x your salary by the time you retire + 1.5 million - this is bare minimum to cover inflation and recession, you might need more if you want lavish lifestyles, traveling, etc. :D

So people have every right to be negative and worried, because most people do not have enough saved for retirement, they think 40,000-100k is a lot in 401k LOL, they think 2.2 million is too much, they only come to see the truth when they retire that it is not much money because the cost of living factor is much higher than the market returns year to year. One year you may get 10%, the other year -15%, the year after -6%, the year after +4%, if you do not have reserves to pad for losses you are cooked basically.

So whether your money doubles in 7 years is not important, people should focus on saving for retirement, when they will need the money the most. And people should draft a will in due order, and not wait until they are 80 to do so, you do your will when you are young and healthy :D

Quote:
Let's just say I live to be 83. That is only 20 more years.

So you just gave your age :D

Chances are Valerie that you WILL live to be 83, the life expectancy has gone up big time, this is why most people statistically will outlive their savings.

Unless you have land, assets, a pension plan and a big 401k, things might be difficult in those 20 years and chances are you would have outlived your investments. All market signals point to a high risk for a deep recession to come, this can really hurt those in retirement already withdrawing their earnings, so it would be far more difficult to recover losses when your principal keeps shrinking. And upcoming recession might end up being a depression, so it could take so many years to get back up to today's level so break even, but inflation will still keep climbing. This is why here governments encourage people to work as much as they can and not retire at 60-65, they want people to work past their 70's, 72-75, some people do work until 75-80 here, even better because statistically they have more wealth and less odds of outlasting their investments - not everyone is lucky to reach 103 like Tasman1 - I hope he has a good pension :D

Don't forget the TAXES you pay on those withdrawals from your 401k, for most people it will close to 30-40% so yeah that's why you need millions to account for inflation, taxes, and recession.
Who has a million $ in their 401k, let alone half, let alone a quarter nowadays.

But those who have a house will likely sell their homes @ $500k, invest it and live in a cardboard box, and if they live in an apartment they still have to pay rent, so if your home is paid for and no mortgage, you are still cooked because you will be spending more in rent than a paid home and maintenance, so you are cooked either way. Only good wealth can secure a happy retirement. There is no middle class anymore. You can thank the criminal bankers and federal reserve and corporate greed.

Quote:
What I am saying, a lot of people think or feel they need hundreds of thousands
of dollars for retirement. Well sure that is nice to say the least but I think it
depends on their situation. If they are a retired married couple, they may be
receiving $4,000 per month social security, one or both might have a pension too,
their house is paid for, they have everything they could ever need and mostly
whatever they want. Does this couple need hundreds of thousands of dollars for
retirement? Might be nice. Good to have money. Realistically, they probably will
not need it and it will go to either their children, nursing home, or the city.

They will need money Valerie. Having your home paid for and social security HELPS, but when you retire you do not stop living and lock yourself in a closet. You still have utilities, taxes, property taxes (property tax alone is a huge expense, depending on the value of your property you might be paying anywhere around 4 figures to 6 figures in taxes!) - then you need clothing, groceries, maintenance on your home, that roof will not last a life time, you must repair the roof (down $10k) repair sewer line down $25k, remodel / paint jobs $50k, redo your basement $80k,
travel sometimes, eat out..... Even if you CUT expenses to make ends meet, there are certain things you cannot cut, you have to eat, and even if you opt for peanut butter sandwiches and water, you still have to pay for home expenses and bare survival. Home remodel and expenses cannot be postponed, neither can property taxes, a home is also an investment, one that you will sell or your heirs will sell and which will require to be in good condition.

So a hundred thousand let alone couple won't cut it. If you are a married couple and both have a large enough 401k + pension + whatever, yeah assuming both parties split expenses and works on a budget yeah, but how many people spend based on their means. North Americans (US & Canada) are sinking in debt and most people are living beyond their means thanks to the convenience of CREDIT.

What good is $100k in 401k, if of that $100k will be worth 30-40% less due to taxes.

Whatever taxes you save by investing when you work, you will be gauged when you withdraw the money, depending on the total income including the withdrawals, so yeah most people only have one stream of income and no cushion for emergencies.

$4k social security ? Here people get less than $600 from Federal government, that covers NOTHING here, not even food, and provincial you get a variable amount depending on how much you contributed, so let's say on average $600 + $700, that does not cover it and does not even cover rent. There is a program here for supplement income, another maybe $200-400 a month for low income earners, but still does not cut it, in this country you need wealth to survive retirement as government alone won't cut it, you are basically getting your own money back (part of it) and here the highest tax bracket fed / pronvicial combined is almost HALF, in this country $25k used to be considered the poverty line, I think now it is $27k - how many people can earn that from their RRSP (401k equivalent) here ? Statistically, a small percentage only.

Here, unless you had a damn good job, accumulated wealth, 7 figures and a pension plan, you cannot hope to live a decent retirement, unless you can settle for living like a poor person, homeless, or with bare minimum. Even the smallest shithole of an apartment here can cost you $800 or more. Housing here is a rip-off and over inflated.
I'm sure it is the same in many states where housing is booming.

In the UK, you'd need a million pounds or more to own a home, it's worse there. In Canada, the shittiest of old house in dire condition is on average $350k-$500k. Some people are selling their 60 year old home in dire conditions for $500k, and new owners have to spend $50k-$100k to repair it. It's crazy ! You have apartments here in the worst areas, the sluims, tiny, old, infested with mice, etc, and some cost about $1k-$1.5k a month. People on welfare in this province get around $500-$600/ month, how can anybody survive that - pay rent, groceries, taxes, impossible, even if you are married. This is why people build debt.
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#6 by valerie » Tue Jun 04, 2019 20:30

I'm 63 and a recent great grandmother.

I think investing in real estate is a decent bet.

One of my uncles in particular (long time deceased, however), invested in real
estate most of his life. He bought and sold land.

Houses can be a good investment too. One just needs to know the market in
their area.

I usually tell people to buy a house because normally after a few years, they
can sell it for more and make a profit. Especially so if they of course, keep
the house well maintained.
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#7 by tasman1 » Tue Jun 04, 2019 21:43

valerie wrote: I'm 63 and a recent great grandmother.

I think investing in real estate is a decent bet.

One of my uncles in particular (long time deceased, however), invested in real
estate most of his life. He bought and sold land.

Houses can be a good investment too. One just needs to know the market in
their area.

I usually tell people to buy a house because normally after a few years, they
can sell it for more and make a profit. Especially so if they of course, keep
the house well maintained.




Depend where one is living



In some part of Australia that is correct but not in all places

Tasmanian data show that for last 60 years real estate investment , ad inflation, produced minus 2 % per year return

You can still buy nice property here for under 120 000 but nothing under 500 000 in Sydney or Melbourne
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