Investing in real estate or discounted paper is a wonderful way to increase the size of your retirement fund rapidly. The “Rule of 72” explains why. The Rule of 72 is a banker’s rule that calculates the number of years it will take for a sum of money to double. You divide the number 72 by the annual percentage rate you are receiving on that sum of money. For example, if you are earning 6% interest on a CD, divide 72 by 6:
The Rule of 72 tells us that if you are earning 6% interest, your money will double in 12 years. How long will it take for your money to double if you are earning a 30% return?
At a 30% annual rate of return, your money doubles every 2.4 years. That is powerful. If you start out with $10,000, it grows to $20,000 in 2.4 years, to $40,000 in 4.8 years and to $80,000 in 7.2 years. In less than ten years, your initial $10,000 investment explodes to $160,000.
And, if you are using your IRA money, all that profit is tax deferred . . . Now that is something worth thinking about.