How Long Will It Take to Double Your Money? This Formula Shows You

Learn the Rule of 72 To Set Realistic Goals and Compare Investments

Reviewed by Cierra Murry

The Rule of 72 is one of investing’s best mathematical shortcuts. By dividing 72 by an investment’s expected annual return rate, investors can quickly estimate how many years it will take to double their money through compound returns.

Financial advisors and individual investors have used this mental math tool for decades to assess investment prospects and set realistic portfolio goals. While sophisticated financial calculators are found all over now, the Rule of 72 can help you on the fly to quickly compare different investment options and time frames.

Below, we take you through how to use it and what to watch out for as you consider different rates of return.

Key Takeaways

• The Rule of 72 is a simple way to estimate how long it will take your investments to double by dividing 72 by your expected annual return rate.
• Higher-risk investments like stocks have historically doubled money faster (around seven years) compared with lower-risk options like bonds (around 12 years).
• The rule provides an estimate, not a guarantee, since actual investment returns vary year to year.
• Investment fees, taxes, and inflation can extend the time it takes for your money to truly double in purchasing power.

How the Rule Works

Understanding the Rule of 72 requires no advanced math skills or financial expertise. The formula simply states: divide 72 by your expected annual rate of return to estimate how many years it will take for your investment to double. For example, if you expect a 6% annual return, it would take about 12 years to double your money (72 ÷ 6 = 12).

This mathematical shortcut works because it approximates the effects of compound interest, where you earn returns not only on your initial investment but also on previously earned interest—like a snowball rolling downhill, gathering more snow with each rotation, growing increasingly larger.

Note

The beauty of the Rule of 72 lies in its simplicity—it transforms complex financial concepts into decisions anyone can understand.

The rule becomes particularly useful when comparing different investment options. Consider these common scenarios:

• A savings account paying 1% interest: 72 years to double (72 ÷ 1 = 72)
• A corporate bond yielding 4%: 18 years to double (72 ÷ 4 = 18)
• A stock portfolio averaging 8%: nine years to double (72 ÷ 8 = 9)

For returns under 10%, the Rule of 72 provides remarkably accurate estimates for expected annual returns. However, its precision decreases with very high or very low rates. A companion formula, the Rule of 69, offers more accurate results for such cases but is less practical for quick mental math for most.

Here are other rates and how long it would take for your initial investment to double:

Real-World Applications

Suppose you’re planning a cross-country road trip. Just as you’d want to know how long it will take to reach your destination, the Rule of 72 helps you map out your financial journey. Let’s look at some common scenarios to see how this works in real life.

Say you’re a conservative investor and just received a $10,000 bonus. If you put it in a high-yield savings account earning 4% interest, the Rule of 72 tells us it would take about 18 years to turn into $20,000 (72 ÷ 4 = 18). That might work for a long-term emergency fund, but what about growing your wealth?

Let’s suppose, though, you’re comfortable with stock market volatility for the chance at higher gains. You invest instead in a low-cost stock market index fund aiming for the market’s historical average return of about 10%, you could double your money in just over seven years (72 ÷ 10 = 7.2). Keep in mind that, unlike a savings account, stock market returns aren’t guaranteed and can vary significantly from year to year.

Important

A big mistake many novice investors make is trying to make up for lost time when they weren’t investing by chasing unrealistic returns, rather than adjusting how much their putting toward their investment account.

Here’s where it gets interesting: thanks to compounding, your money can double several times again over longer periods. At that same 10% return rate, your initial $10,000 could grow as follows:

• $20,000 after seven years
• $40,000 after 14 years
• $80,000 after 21 years
• $160,000 after 28 years

However, that’s only the beginning of the story, since you’ll need to account for how fees, taxes, and other factors claw back some of your gains. Here’s a chart assuming a robust 10% annual gain with these factors included:

Limitations and Considerations

While the Rule of 72 provides useful estimates, several factors can extend the actual time needed to double your money. Inflation, often averaging 2% to 3% annually, erodes purchasing power. A 7% investment return during 3% inflation only provides 4% in real returns, extending your doubling time from about 10 years to 18 years.

Important

The biggest surprise for many investors isn’t how fees impact them today—it’s how those small percentages compound into real dollars over decades.

Investment fees create another drag on returns. A mutual fund charging 1% in annual fees effectively reduces a 7% return to 6%, lengthening the doubling period from 10.3 years to 12 years. When combined with inflation, these factors can significantly impact long-term results.

Taxes also play a crucial role, particularly in taxable accounts. An investor in the 24% tax bracket earning 8% returns might only keep 6% after taxes, extending their doubling time from nine years to 12 years. Tax-advantaged accounts like 401(k)s and individual retirement accounts (IRAs) can mitigate this impact.

Historical Context Matters

Examining how investments have performed historically can help us set realistic expectations. Let’s look at how different types of investments have grown—and sometimes shrunk—over time.

Take the U.S. stock market, measured by the S&P 500. Someone who invested $10,000 in 1970 and reinvested all dividends would have seen their money double multiple times. Even with some scary drops along the way (like 1987’s Black Monday or 2008’s financial crisis), patient investors generally had accounts with money doubling about every seven to 10 years on average.

But not all investments grow at the same speed. Here’s how different investments have typically performed:

• Bank savings (1970 to 2023): Usually doubled every 10 to 14 years
• Government bonds: Typically doubled every 10 to 12 years
• Gold: Has been all over the map—sometimes doubling in just a few years, other times taking decades
• Real estate: Generally doubled every 10 to 15 years, though this varies a lot by location
• Stocks: As represented by the S&P 500 Index, stocks have climbed about 10% a year for the last 50 years, doubling just about every seven.

The key lesson is that faster growth usually comes with increased ups and downs along the way. Think of it like choosing between different roads to the same destination—the highway might get you there faster, but you’ll hit more bumps and face more risks than the slower scenic route.

How Can I Use the Rule of 72 to Evaluate Whether I’m on Track for Retirement?

Let’s answer with an example. If you’re 35 with $100,000 saved and hope to retire at 65 with $800,000, you’ll need to double your money three times in 30 years. Using the Rule of 72, you can calculate what return rate you’d need to achieve this goal and whether it’s realistic.

Does the Rule of 72 Work for Calculating Losses Too?

Yes. If your investment is losing 6% per year, it would take about 12 years to cut your money in half (72 ÷ 6 = 12). This can be especially helpful when evaluating the impact of inflation on uninvested cash.

How Does the Rule of 69 Work?

The rule of 69 (dividing 69 by your expected return rate) gives you a more accurate answer when dealing with continuously compounding investments—meaning those that grow many times throughout the year rather than just once. For example, if you’re earning 6% on your investment, the rule of 72 says your money will double in 12 years, while the rule of 69 says it will take 11.5 years. In real life, with continuous compounding, the rule of 69 is more accurate.

If you’re dealing with regular investment accounts, stock market returns, or just doing some quick planning calculations, stick with the rule of 72. Save the rule of 69 for when you’re working with investments that compound daily or continuously, like some high-yield savings accounts or certain types of bonds, or when you need more precise calculations for professional financial planning.

The Bottom Line

While the Rule of 72 provides a handy shortcut for understanding investment growth, it’s most valuable as a reality check and planning tool. Whether evaluating investment options or planning for retirement, remembering that even good returns take time to double your money can help protect you from unrealistic promises and keep your expectations grounded. It helps you understand how fast your money can realistically grow while accounting for speed bumps like fees, inflation, and taxes along the way.