When giving my tax-planning, wealth-building seminars, I usually ask the audience, “Do you know the ‘Rule of 72′ and how it works?”

Typically, about one-third of the people raise their hands.

Then I explain the wonderful, helpful Rule of 72:

“Write the number 72 on a piece of paper. Assume you can get a 10 percent rate of return.

Divide 10 into 72. You get 7.2.

What that means is your principal sum will double every 7.2 years.

“For example, $10,000 compounding for a period of 36 years will double exactly five times and give you $320,000.

Stop for a minute — do the simple math yourself. Fun, eh?”

But wait! What if that 10 percent return was subject to a 40 percent state and federal income tax? Then you would have only a 6 percent return — 72 divided by six means 12 years to double your money.

Now your $10,000 will double only three times over the same 36-year period ($10,000 to $20,000, $20,000 to $40,000, and $40,000 to $80,000).

Compare that $80,000 with $320,000 when tax-deferred (or tax-free). A huge difference.

So, now we know two factors that are measurably important to creating wealth: rate of return and tax deferment.

Let’s explore tax deferment first.

If you have money in a qualified plan — 401(k), profit-sharing, IRA or other qualified plan — you are on the tax-deferred road. If you are the proud owner of a Roth IRA or the new Roth 401(k), you can wave your tax-free flag.

Now the hard part: the rate of return. How would you like to average more than a 16 percent rate of return per year? You can. The concept is called senior settlements, or SS.

Let me introduce you to senior settlements by quoting a May 18 article from The Wall Street Journal titled Moving the Market:

“AIG (the insurance giant) has bought less than 1,500 policies since 2001, according to spokesman Wil Nans.

“The industry’s annual returns of 10 percent to 15 percent first attracted European and Asian investors. And a few years ago, Berkshire Hathaway Inc., the investment vehicle of billionaire investor Warren Buffett, began buying life settlements, according to securities filings.”

A senior settlement is simply the purchase of an existing insurance policy from a senior (65 or older) by an investor.

The selling senior, who no longer wants to pay premiums, gets a much larger price for the policy than by taking the cash surrender value from the insurance company. The senior wins. The investor wins by making a large profit without risk (the senior is sure to die).

Can you become one of the investors? Yes. A public company trading on the Nasdaq makes it easy. The average rate of return on senior settlements is 16.36 percent per year and has been more than 16 percent throughout the company’s 14-year operating history.

You can become a senior-settlement investor in one of three ways: taxable, tax-deferred or tax-free. Following are the most common possibilities:

• Taxable. You use your own funds or funds you control, like your corporation or other business entities, family limited partnerships and any noncharitable trust.

• Tax-deferred. Almost everyone can play this profitable game via a qualified plan. The trustees of pension plans or other plans that are not self-directed can join the profitable fun by investing the plan funds in senior settlements for the benefit of all participants.

• Tax-free. A Roth IRA or Roth 401(k) can fatten your tax-free accumulations. Charitable entities — charitable remainder and lead trusts and family foundations — are a perfect fit.

As you can see, we have a very positive attitude toward the potential wealth-building power of senior settlements.

But since senior settlements are probably new to almost everyone reading these words, here’s a suggestion:

Show this column to you professional advisers — CPA, lawyer, banker, financial planner and others.

Discuss senior settlements from at least these two aspects concerning your investments (taxable or otherwise):

1. The next time you are about to make an investment, determine how senior settlements compare with other possible investment choices.

2. Compare existing investments with your long-term (don’t forget to apply the Rule of 72) and short-term (about three to five years) goals.