After creating a "retirement plan", which is built on achieving a certain income level from a certain savings level (see previous blogs for this), a next logical step is measuring if you are "on track".

One technique I use frequently and quicly is the rule of 72. Take the interest rate on an investment. Divide this into 72. The result is the number of years it will take that investment to double.

4 examples
12% interest return. 72/12=6. 12% return takes 6 years to double.
10% return. 72/10=7.2. 10% return takes 7.2 years to double.
9% return. 72/9=8. 9% return takes 8 years to double.
6% return. 72/6=12. 6% return takes 12 years to double.

Backwards check. $100 invested
yr 1 $110
yr 2 $121
yr 3 $133
yr 4 $146
yr 5 $160
yr 6 $176
yr 7 $193
.2 years=$200 (money doubled)


So a way to check retirement. Take the amount needed to retire. If you have not calculated this, use "Current Income/.04" as calculation of what you need. See previous blogs for explanation on this.

My example: Assume you need $1,000,000 ($1 M) saved.

Half this ($500,000) do you have this saved yet?

If not, half it again ($250,000). Do you have this saved yet?

If not half it again ($125,000). Do you have this saved yet?

If not, half it again ($62,500). Do you have this saved yet?

If not half it again ($31,250). Do you have this saved yet?

If not, half it again ($16,625). Do you have this saved yet?

When you do the above, count the number of "halfs" you did. Each time you divided by half, add 8 years to your current age.

This will suggest when you could retire with a 9% return on your investments.

As you save more, especially at younger ages, this equation will look more favorable on your situation.