Q: Why is compound interest such an important element of a retirement savings plan?
Douglas Andrew: Albert Einstein once defined compound interest as the “eighth wonder of the world.” Financial professionals, such as Tax attorneys and CPAs who have gained a full grasp on what compound interest can accomplish have the information to influence their clients’ futures.
Q: What is the first marvel to accumulate wealth?
Douglas Andrew: Compound interest is often referred to as first marvel of wealth accumulation.
Q: What is the second marvel of wealth accumulation?
Douglas Andrew: The next marvel is called tax-favored accumulation. A dollar that doubles each period for 20 different periods will grow to more than a million dollars if it’s tax-free. If it’s taxed-as-earned for someone in the 25 percent tax bracket, it will be worth a mere $72,000. The amount is even less if you’re placed in a higher bracket. [Read more...]