How the Rule of 72 Works
Divide 72 by your annual rate of return to get approximate doubling time. At 6%: 72/6 = 12 years. At 8%: 72/8 = 9 years. At 10%: 72/10 = 7.2 years. This works because 72 has many divisors and approximates the natural logarithm relationship. The exact formula uses ln(2)/ln(1+r), but 72 is accurate enough for mental math.
Accuracy by Interest Rate
The Rule of 72 is most accurate between 6-10% annual returns. At 2%, the exact doubling time is 35 years versus the Rule's 36 years — very close. At 25%, exact is 3.11 years versus the Rule's 2.88 years — less accurate. For rates under 5%, use 69.3 instead of 72. For very high rates above 15%, use 75-78 for better accuracy.
Using the Rule for Retirement
If you need $2 million by age 65 and currently have $500,000 at age 47, you have 18 years. At 8% return, money doubles every 9 years. Your $500k becomes $1M by 56, then $2M by 65 — exactly on target. If returns drop to 6%, doubling takes 12 years, so you only reach $1M by 65. This is why conservative retirement planning uses 5-6% assumptions rather than 8%.
Frequently Asked Questions
How accurate is the Rule of 72?
Very accurate for 6-10% returns. At 8%, exact doubling time is 9.01 years versus the Rule's 9 years. Less accurate below 5% or above 15%.
Can I use the Rule of 72 for halving time?
Yes. Divide 72 by the inflation rate to see how long purchasing power halves. At 3% inflation, purchasing power halves in 24 years.
Why 72 and not 70 or 75?
72 is divisible by 2, 3, 4, 6, 8, 9, and 12 — making mental math easy. 69.3 is mathematically precise but harder to divide.