The Rule of 100
What is the Rule of 100?
There are no set rules when it comes to your retirement decisions. However, the rule of 100 could be a useful guide when planning for retirement. Essentially, you might want to protect more of your money from market loss as you get older. This is because you may have less time for your retirement funds to recuperate from a market drop as you age.
The rule of 100, quite simply, states that you should subtract your age from the number 100. The result of this is the maximum percentage amount that you may want to invest into more risky selections. For example, if you’re 75 years old, you may want to only let 25% of your money be subject to the risks of the market. The other 75% should be kept safe.
How to Rule of 100 Impacts You
In your younger years, your account typically has time to bounce back if a market correction occurs. But you don’t have this luxury when you’re older. The less time your account has to adjust after a market drop, the more conservative you should be. This is the reason for the rule of 100.