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.