A Simple Guideline for Asset Allocation
As retirement approaches, many people begin to wonder whether their investment strategy still fits this new phase of life. One commonly discussed guideline is the Rule of 100. It is a simple formula designed to help you think about how much of your portfolio may be invested in growth assets versus more conservative investments as you age.
How the Rule Works
The concept is straightforward. Subtract your age from 100. The result represents the percentage of your portfolio that could be allocated to growth-oriented investments like stocks. The remaining portion would typically be directed toward more conservative options such as other SafeMoney investments. For example, at age 60, the rule would suggest roughly 40 percent in growth investments and 60 percent in more conservative holdings.
Is your plan flexible enough to allow you to adjust your strategy to stay aligned with your goals and lifestyle?
Retirement is not static, and financial needs can change. Staying aware allows your plan to evolve as your priorities, spending habits, or life circumstances shift.
Why Allocation Often Shifts Over Time
The reasoning behind this approach is tied to time and risk. When you are younger, you generally have more time to recover from market downturns, which allows for greater exposure to growth investments. As you move closer to retirement and begin relying on your savings for income, protecting what you have built often becomes more important than pursuing higher returns.
Focus on safety as
time horizon shortens.
The logic behind the rule is that the older you are — and the closer you are to needing your money — the less time you have to recover from market downturns. Increasing the portion of “safe” investments helps reduce the risk of losing a large chunk of your savings right when you might need it most.
It Is a Guideline, Not a One-Size-Fits-All Rule
The Rule of 100 is meant to provide a starting point, not a rigid formula. Your comfort with risk, income needs, other sources of retirement income, and long-term goals all play an important role in shaping the right allocation for you. Some investors may feel comfortable maintaining more growth exposure, while others may prefer additional stability.
Diversification Still Matters
Even within a more conservative allocation, spreading investments across different asset types can help manage risk and create balance between income and growth. A thoughtful mix of assets can provide both stability and opportunity.
Bringing It Back to Your Plan
The goal is not simply to follow a rule. It is to build a strategy that aligns with your stage of life and supports your retirement lifestyle. If you would like to review whether your current allocation still fits your long-term goals, we are always happy to have that conversation.
