![]() ![]() ![]() ![]() If you are smart and take advantage of your company’s 401K plan or some other tax-sheltered savings plan, you can accumulate much more over your working life, and you’ll need to. These are nominal dollar amounts (not adjusted for inflation), so $1.6 million in 2064 won’t have the spending power that $1.6 million has today (unless we experience monetary deflation). So, $100,000 at age 22 grows to $1,600,000 by age 70 without putting in another penny. If you wait until age 70 to start collecting your social security benefit, you’ll maximize the monthly payment from the government. Suppose you won $100,000 in the lottery at age 22 and invested that money earning a 6% return. If you maintained that 6% return on investment over your entire working life (67–22 = 45 years), that implies that you will double your money 3.75 times. For example: If you believe that you can earn a 6% return, the Rule of 72 says that your money will double in value in 72/6 = 12 years. The Rule of 72 provides a short-cut method for determining the number of years it takes to double your money for a given interest rate. If you save and invest wisely, it’s possible to accumulate a decent nest egg. I figure that I’ve got a good shot at making it to 95. Why 38 years? Well, my father managed to live till he was 94 years old. I’m 57 years old, so I wanted to start thinking about what my personal financial situation looks like in 10–20–38 year time horizons. This time, I decided to expand my time horizon. This thinking normally encompasses career and investment goals. Every decade, I spend a few weeks planning the next 10 years. ![]()
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