What Millennials Need to Retire Wealthy | HowMoneyWorks
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# What Millennials Need to Retire Wealthy

June 8, 2023
Millennials
Personal Finance
Rule of 72

#### Itâ€™s officialâ€”Millennials are serious about building wealth.

According to a recent study, Millennials (ages 25 to 40) have an average of \$51,300 in personal savings, while their retirement accounts have an average balance of \$63,300.Âą

Thatâ€™s far higher than it was just a few years ago. In 2019, they had saved just \$23,000 for retirement.Â˛ Theyâ€™ve nearly tripled their wealth in less than 3 years!

Itâ€™s no surprise. Few generations have gotten kicked in the pants quite like Millennials. Between recessions, pandemics, frenzied housing markets, and international instability, theyâ€™ve learned that wealth isnâ€™t a luxuryâ€”itâ€™s an absolute necessity.

But Millennials still have a long way to go before they retire wealthy. Hereâ€™s what they need if theyâ€™re going to arrive at their long-awaited destinationâ€¦

##### Millennials must knowâ€”and useâ€”the Rule of 72.

The Rule of 72 is a simple mental math shortcut that estimates when your money will double, given a fixed compounding interest rate. Hereâ€™s what it looks likeâ€¦

##### 72 Ă· interest rate = years to double

Itâ€™s simple, itâ€™s powerful, and it might change the course of your financial future.

Letâ€™s say youâ€™re 35 years old with \$60,000. Thatâ€™s a solid start. But how can you turn \$60,000 into \$1 million by age 67?

Think of it like thisâ€”you need to double your money just overÂ 4 timesÂ to reach \$1 million.

Now, subtract your current age from your retirement age. Thatâ€™s how long you have left to build wealth.

###### 67 - 35 = 32 years

So you have 32 years to double your money just over 4 times. In other words, your money needs to double everyÂ 8 years.

Now itâ€™s time to use the Rule of 72, but with a slight twistâ€”swap the interest rate with the years for each double.

###### 72 Ă· years for each double = interest rate needed

Plug in your numbers, and you getâ€¦

###### 72 Ă· 8 years = 9% interest rate

In this scenario, youâ€™d need just over a 9% interest rate to retire as a millionaire.

Armed with that knowledge, youâ€™ll be better able to see through gimmicks like a â€śhigh-interest savings accountâ€ť that offers .06% interest. Youâ€™ll also be left with just one questionâ€”where can you find an account with 9% interest?

Answer that question with your financial professional, and youâ€™re on the right track for retiring wealthy.

Try the exercise above with your age and personal savings. What was the result? Then, contact a financial educator who can help you fine-tune a strategy to reach your retirement goals.