“Retirement”
Courtesy Of Kimberly Moore AXA Advisors, LLC (407) 926-2588 kimberly.moore@axa-advisors.com 5337 Millenia Lakes Blvd. Suite 405 Orlando, FL 32839

The POWER of Compound Interest

Are you aware of the power of compounding? Let’s start with the basics. Assume you could earn a constant 6% every year. If you invested $1, it would grow to $2 in 12 years. This doubling is called the Rule of 72. The rule says: “If you divide the known interest rate into 72, the quotient will be the number of years it takes money to double.” Try it.

The higher the interest rate, the fewer years it takes for money to double. The period of time it takes for money to double is called an interval. How many intervals do you have left until you reach retirement? If you are 40 years old and can earn 6% on your money, you have about two intervals until you reach 65. In this example, each interval is 12 years long. Imagine having $100,000 in an account earning 6% interest and you are now age 40. In 24 years, that account will be worth $400,000. If you wait until you are 72 to start taking the money, you will have $260,000 more – that’s $660,000!

Just for the sake of math, consider a 10% interest calculation. Then you would have 4.44 intervals and your $100,000 would double four times. That’s FOUR DOUBLES, plus a little. That same $100,000 would grow to nearly $2.4 million by age 72.

So ask yourself -- what is the power of compound interest? The real power is TIME – time to allow your contributions to grow within a savings strategy. Does it make any sense to procrastinate? Does it make sense not to contribute to your 401(k), IRA or ROTH IRA – as much as you can, as fast as you can? Get the facts today. Yes, it will take some self-discipline and personal sacrifice, but it’s worth it if you want the Rule of 72 to work for you.