The Rule of 72

A simple concept called "The Rule of 72" shows the effect of time and compounding on your money. The Rule of 72 is an equation that states that your money will double approximately at the point in time determined by dividing 72 by the percent of interest you earn. Therefore, if you're earning 7%, then it will take about 10.28 years for your money to double.
(72 divided by 7)

At a 28% tax bracket, you could save $560 in taxes in one year, just by starting an IRA.

When does $14,000 equal $68,000?

Here we have an example of two investors in IRA's. Individual A knows the importance of deductibility and time. Remember that the money accumulating is tax deferred so every cent goes to building a secure retirement. Individual B has the right idea but time hurt him severely. It's simple, while people waste time looking for "get rich quick" schemes, the best investments are available to them. Qualified retirement plans, like IRA's and Keogh's combine the power of time and money, with the added benefit of tax deductibility and tax deferability. A good retirement rule of thumb: Before you begin any other kind of investment, maximize your IRA. Note that Individual A began early at age 22 and funded for 7 years, yet they both had about the same amount of savings at age 61.

	Individual A		Individual B
Age	Annual Payment	Accumulation End of Year	Annual Payment	Accumulation End of Year
22	$2,000	$2,200	$0	$0
23	2,000	4,620	0	0
24	2,000	7,282	0	0
25	2,000	10,210	0	0
26	2,000	13,431	0	0
27	2,000	16,974	0	0
28	2,000	20,872	0	0
29	0	22,959	2,000	2,200
30	0	25,255	2,000	4,620
31	0	27,780	2,000	7,282
32	0	30,558	2,000	10,210
33	0	33,614	2,000	13,431
34	0	36,796	2,000	16,974
35	0	40,673	2,000	20,872
36	0	44,741	2,000	25,159
37	0	49,215	2,000	29,875
38	0	54,136	2,000	35,062
39	0	59,550	2,000	40,796
40	0	65,505	2,000	47,045
41	0	72,055	2,000	53,950
42	0	79,261	2,000	61,545
43	0	87,187	2,000	69,899
44	0	95,905	2,000	79,089
45	0	105,496	2,000	89,198
46	0	116,045	2,000	100,318
47	0	127,650	2,000	112,550
48	0	140,415	2,000	126,005
49	0	154,456	2,000	140,805
50	0	169,902	2,000	157,086
51	0	186,892	2,000	174,995
52	0	205,581	2,000	194,694
53	0	226,140	2,000	216,364
54	0	248,754	2,000	240,200
55	0	273,629	2,000	266,420
56	0	300,992	2,000	295,262
57	0	331,091	2,000	326,988
58	0	364,200	2,000	361,887
59	0	400,620	2,000	400,276
60	0	440,682	2,000	442,503
61	0	484,750	2,000	488,953
Total Contributions	$14,000		$68,000
Total Accumulation at age 62	$533,225		$540,049

Hypothetical rate of 10% and values. Tax deferment until withdrawal.

Withdrawals prior to age 59 1/2 may be subject to a 10% Federal penalty tax.