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Asset Protection: Be your own retirement calculator

Posted February 1, 2008

“Most investors fail to appreciate the math involved when they’re mapping out their long-term financial plan. They fail to plan accordingly because they miscalculate financial projections and mathematical equations. As a result, these investors never have enough savings to properly fund their retirement.” — Eric Roseman

by Eric Roseman, The Sovereign Society A-Letter

Baltimore – (TFN): Compounding is real magic - if you know how to calculate results.

The problem is most investors fail to appreciate the math involved when they’re mapping out their long-term financial plan. They fail to plan accordingly because they miscalculate financial projections and mathematical equations. As a result, these investors never have enough savings to properly fund their retirement.

At a time of increasing market volatility and uncertainty, investors must understand how to calculate compound interest. That’s what the Rule of 72 is all about. As you debate whether to save or spend for your retirement, keep the Rule of 72 in mind.

Retirement Calculator: The mathematics of saving

A recent survey conducted by The Wall Street Journal found that most investors underestimated how much savings grow over time. Equally devastating was the damage debt accumulation factored into retirement planning. Investors also didn’t take into account the worst evil in the financial planning world, known as “reverse compounding.”

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Saving for a rainy day is vital to retirement planning, but so is paring down your net debt. Over time, high debt loads can eat into capital as extraordinarily high interest rates on credit cards turn manageable debts into explosively high monthly burdens, draining savings.

The first thing investors and savers should do is think in terms of “compound” interest, not simple interest. Read on to learn how to calculate compound interest and what you can do to ensure your debt doesn’t destroy your retirement dreams.

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