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Retirement Savings and the Rule of 72s

What pastors and church staff can learn about the power of compounding.

Pastors and church staff often are overwhelmed by the thought of setting aside money for their future retirements. But the sooner they start, the quicker they can make the money they save and invest work to their advantage.

This is because of the concept of compounding. It works like this: Your rate of return can rise exponentially based on the investment of your earnings over the long-term horizon. It’s remarkable how that money will grow over 20, 25, or more years. And if that money is placed in a 403(b) account, which many clergy and church leaders use, it grows tax-deferred. In other words, you have tax-free earnings and the compounding of your investment in most cases.

To visualize the kinds of returns that are possible, it’s helpful to understand the concept of the rule of 72s. Under this rule, any amount of money doubles in 72 divided by your rate of return. For example, ...

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Richard R. Hammar is an attorney, CPA and author specializing in legal and tax issues for churches and clergy.

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  • November 2, 2017

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