How long does it take to double your money? (2024)

FAQs

How long does it take to double your money? ›

The Rule of 72 is a calculation that estimates the number of years it takes to double your money at a specified rate of return. If, for example, your account earns 4 percent, divide 72 by 4 to get the number of years it will take for your money to double. In this case, 18 years.

One of those tools is known as the Rule 72. For example, let's say you have saved $50,000 and your 401(k) holdings historically has a rate of return of 8%. 72 divided by 8 equals 9 years until your investment is estimated to double to $100,000.

As a rate of return, long-term mutual funds can offer rates between 12% and 15% per year. With these mutual funds, it may take between 5 and 6 years to double your money.

Do you know the Rule of 72? It's an easy way to calculate just how long it's going to take for your money to double. Just take the number 72 and divide it by the interest rate you hope to earn. That number gives you the approximate number of years it will take for your investment to double.

For example, the Rule of 72 states that $1 invested at an annual fixed interest rate of 10% would take 7.2 years ((72 ÷ 10) = 7.2) to grow to $2. In reality, a 10% investment will take 7.3 years to double (1.10^7.3 = 2).

“By the time you hit 33 years old, you should have $100,000 saved somewhere,” he said, urging viewers that they can accomplish this goal. “Save 20 percent of your paycheck and let the market grow at 5% to 7% per year,” O'Leary said in the video.

As a very basic example, if you had $5,000 in your 401(k) today, and it grew at an average rate of 5% per year, it would be worth $10,441 in 20 years—more than double. If you withdraw those funds early, however, you're not only facing a stiff tax penalty, you're losing all of that additional growth.

For a quick return on a $5,000 investment, consider options like stock trading, especially in high-growth sectors or investing in a diversified mutual fund. Short-term P2P lending can also be a way to see quicker returns, though it carries higher risk.

While quite a few personal finance pundits have suggested that a stock investor can expect a 12% annual return, when you incorporate the impact of volatility and inflation, 7% is a more accurate historical estimate for an aggressive investor (someone primarily invested in stocks), and 5% would be more appropriate for ...

You can get more than 11 per cent from a new retail bond if you tie up your money for three years, but it doesn't come without risks.

How long does it take to double $500,000? ›

1 At 10%, you could double your initial investment every seven years (72 divided by 10). In a less-risky investment such as bonds, which have averaged a return of about 5% to 6% over the same period, you could expect to double your money in about 12 years (72 divided by 6).

That being said, although each 401(k) plan is different, contributions accumulated within your plan, which are diversified among stock, bond, and cash investments, can provide an average annual return ranging from 3% to 8%, depending how you allocate your funds to each of those investment options.

Contributions and earnings in a Roth 401(k) can be withdrawn without paying taxes and penalties if you are at least 59½ and had your account for at least five years. Withdrawals can be made without penalty if you become disabled or by a beneficiary after your death.

According to Standard and Poor's, the average annualized return of the S&P index, which later became the S&P 500, from 1926 to 2020 was 10%. 1 At 10%, you could double your initial investment every seven years (72 divided by 10).

Understanding the 7% Rule for Retirement

Let's illustrate this with a simple example: if you have $100,000 in your retirement savings, under the 7% rule, you would withdraw $7,000 each year.