Whilst not always front of mind, everyone has thoughts about not working or retirement and inevitably a large part of this is will I have enough money?
A very quick way to determine how long it will take you to double your money is to use the Rule of 72. The Rule of 72 is a shortcut to estimate the number of years required to double your money. You take your annual return as a % and divide that into 72.
For example, if you receive a 6% return, then it will take approximately 12 years (72 / 6%) for your money to double. Likewise if you receive a 10% return then it will take approximately 7 years for your money to double.
Let’s use this for your retirement calculation.
Assume the long term return for your superannuation account is 10%. That means your current superannuation will double every 7 years.
If you want to retire at age 60 and your currently 46 that means you have 14 years left…or 2 lots of 7.
So if you have $200,000 in your account, this will grow to $400,000 in 7 years and then double again to $800,000 in another 7 years. Not bad. Also any extra contributions you make will add a big difference.
If you’re in your 50’s though you might only have one 7 year period left so that $200,000 might turn into $400,000 before time catches up with you.
As always with finances, the sooner you start the easier it is. So how many 7’s do you have left?