Strategic planning for college and retirement goals.
The Johnsons, a dual-income couple earning $450,000 annually, face the challenge of funding college for their three children (ages 8, 12, and 15) while also ensuring a secure retirement. With $2.1 million already saved for retirement, they are concerned about the projected $1.2 million college savings shortfall. They need a plan to simultaneously address both goals without jeopardizing their long-term financial stability.
Using the Rule of 72 Calculator, we demonstrated how consistent investment returns of 8% would approximately double their existing retirement accounts every 9 years. This projection provided reassurance about their retirement prospects, allowing them to strategically allocate more funds toward college savings. Implementing a 529 plan and adjusting their asset allocation to favor growth stocks within a portion of their portfolio, targeting a 10% average annual return for that allocation, could potentially double the allocated amount in approximately 7.2 years, significantly closing the college savings gap.
The Rule of 72 Calculator was used to illustrate the power of compounding and the impact of different growth rates on their investments. This informed the decision to strategically allocate funds to potentially higher-growth assets.
$350,000 increase in projected college savings within 7 years through strategic asset allocation.
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