Weekly News via Email
   Set as homepage | Add to favorites | Customer Service | Subscribe Now | Place an Ad | Contact Us | Sitemap Wednesday, 11.26.2014
Classifieds
News Archive
Su Mo Tu We Th Fr Sa
 1  2
 3  4  5  6  7  8  9
 10  11  12  13  14  15  16
 17  18  19  20  21  22  23
 24  25  26  27  28  29
Online Extras
Site Services
Around Bend
Outdoor Fun
Travel Info
Shop Local




Members Of



Poll: Today's Live Poll
Email to a friend | Print this | PDF version | Comments (0 posted) 
  Blogger |   del.icio.us |   digg |   newsvine

Feb 29,2008
Taking Stock: Rule of 80, Rule of 72 both add up
by Malcolm Berko

Dear Mr. Berko: Can you please explain the difference between the Rule of 80 and the Rule of 72? Is one of them better than the other in figuring out how much money I would have at retirement? Numbers are very confusing to me and I would be very happy if you could explain how the rules work and tell me in simple language. My broker is out of the office to have a special surgery and then he has to study for the continuing educations tests for the New York Stock Exchange and his Florida State Insurance license and is too busy to explain the rules.

E.S.

Lady Lake, Fla.

Dear E.S.: If your broker has to study for those ridiculously silly regulatory tests, he must be industrial-strength dumb. I've never known a single person to fail a continuing education test in 20 years. Those exams have zero educational value; however, the lucky owners whose testing firms appointed to administer these inane exams earn millions of dollars annually from this cockamamie boondoggle. I've taken those exams, so tell your broker that even Laurel and Hardy could get a passing grade even if they don't know how to read. And tell that broker to ask his office manager how he can avoid taking the exam. The office manager will know what to do. What an absurd excuse to avoid answering two simple questions. (Unless the special surgery involves his tongue.)

The Rule of 80 is a simple math formula that defines the earliest age at which you can retire and receive 100 percent of your pension benefits from the local area government employees retirement system. In most work venues if you hang up your boots prior to age 66 (today) you will receive a reduced payout (which can be as low as 40 percent) even if you've been employed for 20 or 30 years. The Rule of 80 is an attempt to bring fairness into the system. Here's how it works.

It's 1978; Velveeta Jackson is 20 when she begins working as a telephone lineperson for the City of Deaf Smith, Texas. Velveeta is covered by the city's pension plan. Now it's 30 years later and Velveeta, at age 50, is still a telephone lineperson and is covered by the Deaf Smith City Pension Plan. Because Velveeta is 50 and because she worked 30 years and because the sum of her age and years worked equal 80, the Rule of 80 allows her to receive 100 percent of the pension benefits she would normally receive at the normal retirement age of 66.

Without the Rule of 80 the reduction in benefits is one-half of 1 percent per month (6 percent yearly) for each month the member retires before the age of 66.

The Rule of 72 is simple as Simon, Sam and Saul. The Rule of 72 tells you how long (in years) it takes $100 to double at a specific rate of interest. Example: if you have $100 invested at 6 percent it will grow into $200 in 12 years. The resulting answer is determined by dividing the interest rate (6 percent) into 72. If you have $100 earning 8 percent that money will double in 9 years because 8 percent divided into 72 is 9. If you have money earning 12 percent that money doubles in 6 years. If you have $100 earning 10 percent, then that money will be worth $200 in 7.2 years. If that money continues to earn 10 percent, it would grow to $400 in 14.4 years, $800 in 21.6 years, $1,600 in 28.8 years and $3,200 in 36 years. And in 101.4 years at 10 percent that $100 would grow to $1,622,200. What an easy way to make your grandchildren multimillionaires.

But if you started with $5,000 at 10 percent it would grow to $1.28 million in 59 years, just enough to make your children happy consumers.

Please address your financial questions to Malcolm Berko, P.O. Box 1416, Boca Raton, FL 33429 or e-mail him at malber@comcast.net.

© Copley News Service
4725 times read

Related news
Taking Stock: Taxable, tax-free yields aren't much different by Malcolm_Berko posted on Dec 14,2007

Taking Stock: Dying to know about life insurance scheme by Malcolm_Berko posted on Aug 03,2007


Taking Stock: Some retirement plans make excellent collateral by Malcolm_Berko posted on Mar 27,2009

Taking Stock: Fed Web site can help track down old pensions by Malcolm_Berko posted on Jun 08,2007

Did you enjoy this article? Rating: 4.99Rating: 4.99Rating: 4.99Rating: 4.99Rating: 4.99 (total 287 votes)

Market Information
Breaking News
Most Popular
Most Commented
Featured Columnist
Horoscope Guide
Aquarius Aquarius Libra Libra
Aries Aries Pisces Pisces
Cancer Cancer Sagittarius Sagittarius
Capricorn Capricorn Scorpio Scorpio
Gemini Gemini Taurus Taurus
Leo Leo Virgo Virgo
Local Attractions
Bend Visitors & Convention Bureau
Bend Visitors & Convention Bureau

Mt. Bachelor Resort
Mt. Bachelor Resort

Les Schwab Ampitheater
Les Schwab Ampitheater

Deschutes County Fairgrounds
Deschutes County
Fairgrounds

Tower Theatre
Tower Theatre

The High Desert Museum

Advertisements



Deschutes County

Google  
  Web    BendWeekly.com
© 2006 Bend Weekly News
A .Com Endeavors, Inc. Company.
All Rights Reserved. Terms under
which this service is provided to you.
Please read our Privacy Policy. Contact us.
Bend Weekly News & Event Guide Online
   Save the Net
Advertisement
External sites open in new window,
not endorsed by BendWeekly.com
Subscribe in NewsGator Online
Add to Google Add to MSN Add to My AOL
What are RSS headlines?