What is the rule of 70?

A general rule that gives you an approximate number years for your investment to double in value

Derek Silva

Derek Silva

Published July 15, 2019

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KEY TAKEAWAYS

  • Years for an investment to double = 70 divided by annual rate of return

  • You can estimate the growth of a portfolio (or retirement savings) and then adjust your asset allocation accordingly

The rule of 70 provides a simple way to determine how many years it will take an investment’s value to double. All you need to know is the expected annual rate of return or interest rate.

The rule of 70 formula is years for investment to double = 70 ÷ annual rate of return

As long as you can estimate an annual growth rate for an investment, you can use the rule of 70. That includes investments like mutual funds, exchange-traded funds (ETFs), and real estate. You can also use it on a whole investment portfolio. If you have a savings account or certificate of deposit (CD), you can use the rule of 70 with the interest rate or APY.

You may also see people use the rule of 72 or the rule of 69.3. Instead of dividing 70 by the growth rate, you just use 72 or 69.3. Mathematically, the most accurate value to use for something with compounding interest is 69.3. However, that isn’t the easiest number to work with, which is why people round to 70.

Some people use 72 for the same reason: it is evenly divisible by more numbers (1, 2, 3, 4, 6, 8, 9, and 12) and so it’s easier to use with mental math. Ultimately, these numbers will all return a good approximation of how many years you need to double your money.

In this article:

How to use the rule of 70

The simplest situation for using the rule of 70 is to see how long it’ll take your money to grow based on its annual interest rate or rate of return. This is possible for investments and savings accounts, including CDs and bonds.

This knowledge helps you plan for the future because you can estimate the future value of a portfolio. In particular, you may want to see if you will have enough savings as you’re planning a retirement budget.

You may also want to change your contribution rate to your retirement accounts, like a 401(k), if you see that the money won’t grow enough by the time you reach retirement. Another option in that case is to adjust your asset allocation or change your individual investments to help you meet a target growth rate.

If you invest in an individual retirement account, such as a Roth IRA, you may need to reallocate your investments manually.

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Limitations with the rule of 70

As a rule of thumb, the rule of 70 works well. However, the answer you get won’t be completely accurate for a couple of reasons.

One reason is that it assumes something is continuously compounding, which means interest is constantly being calculated and added to your account. Most savings accounts compound interest monthly, and not constantly. Even a CD, which probably has a set interest rate and which you won’t touch during its term, may only compound once per month — not truly continuously. That means the rule of 70 will slightly underestimate the number of years it takes your money to grow.

This difference isn’t noticeable when you have a small growth rate but will become more apparent if you’re dealing with rates around 10% or more. This is most important to note if you’re estimating the growth of investments, like stocks or mutual funds.

Protip: Look for a savings account that compounds interest daily.

Changing your account balance also changes the calculations, especially if you make large or frequent deposits and withdrawals.

The rule of 70 also assumes a constant growth rate for the life of the investment. Most savings accounts don't change interest rates, but it is possible. Year over year, on the other hand, a stock or investment portfolio will probably have a different rate of return, and making a prediction for the upcoming year is nearly impossible. You should recalculate regularly as your rate of return changes.

(Read more about how to pick stocks.)

Finally, it’s worth reiterating that this rule is just an estimate. You should make more precise calculations or talk with a financial advisor before making any big changes to a retirement plan.

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