Summary: Remember the Rule of 72 Abundant living requires a willingness to ask ourselves key questions from time to time regarding our intended course for the future. The right questions can help us avoid distractions or flat out money myths that could affect our ability to reach our goals. Here are a few questions you may find useful. True or false? Halfway to retirement, a person should have half of the money he or she will need for retirement. This one is false. Let's imagine that a person will graduate from college and begin his or her profession at age 23 with plans to retire at age 65. They'll be looking at 42 working years. Keeping in mind the rule of 72, if we’re earning 7%, our money will double about every 10 years. Now, if we’re averaging 10%, that means our money will double every 7.2 years. This means that in 42 years of working and saving, if we divide 7 into 42, our money should double 6 times. Imagine we started out with $100,000 and it doubled every 7 years, we'd end up at $6.4 million at the end of those six periods of doubling. Notice how in the last 7 years our growth accomplished what it took the other 5 periods to accomplish combined? This means that the last 7 years of retirement ofttimes is where we’ll double whatever we’ve accumulated up to that point. It's unreasonable to expect to have half the money we'll end up with when we're only half the way to retirement. With 7 years to retirement and a 10% rate of return, we’ll actually have twice as much as whatever we’ve saved in the preceding 36 years. Is 10% a realistic rate of return? Yes, it's very achievable. Especially once we fully understand and have implemented the strategies that allow for liquid assets safely earning a predictable rate of return. The lesson here is simple, people don’t get wealthy by putting their money into tax-deferred vehicles such as IRAs or 401(k)s. Instead, they put the power of tax-free accumulation, access and distribution to work for them. A Few More Questions Consider a few other true or false questions to help us chart a more clear course toward our brighter future. True or False? If we deposited ten thousand dollars in an investment account earning, say, 10%, it will grow to more money than if we had ten different investment accounts with only $1,000 in each earning the same 10%. Which will grow the most? A bigger sum in one account earning 10% interest at the end of 20 or 30 years, or a thousand bucks in ten different accounts earning the same rate of return. Actually, there is no difference whatsoever. A great many people wrongly believe that if having more money, at a given rate of return, in a particular account will cause it to grow to a bigger sum than if they split the same amount up into a number of different accounts at the same rate of return. Here’s another question. True or false? During the worst times in America economically–including the Great Depression and numerous recessions–real estate or banks have always been the safest places to have one's money. That is false. In reality, during the Great Depression, some real estate dropped as much as 80% in value. This means that many people saw their hard-earned equity vanish overnight. It can also happen during recessions like the one that happened in 2008. What we must learn from this is that real estate can be of the least secure places to keep our money when the market tanks. Also, never forget that during the Great Depression, many banks closed. As much as 40% of those banks never opened again. They were finished. Historically, the best place to keep one's money during the Great Depression was in the life insurance industry since the legal reserve insurance companies came through that mess with flying colors. The rates of return during that time we low, often around 2-3%. Most importantly, people didn’t lose their money and kept earning that rate of return tax-free....
