Final answer:
You need an annual return of approximately 4.56% to grow your current savings of $350,000 to $1.5 million for retirement at age 60. This showcases the power of compound interest over a 30-year period.
Step-by-step explanation:
To calculate the necessary rate of return to grow your current savings of $350,000 to your retirement goal of $1.5 million by age 60, you can use the future value formula for compound interest. You have 30 years to grow your investment, which requires solving for the interest rate in the equation:
FV = PV (1 + r)^n
Where FV is the future value of the investment, PV is the present value, r is the annual interest rate (expressed as a decimal), and n is the number of compounding periods. Here, FV = $1,500,000, PV = $350,000, and n = 30. After substituting the known values and solving for r, you'll find that the required annual rate of return is approximately 4.56%.
This demonstrates the power of compound interest and indicates that to reach your retirement goal, you should focus on investments that can potentially yield a return of at least 4.56% per year.