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The Wild, Risky Rule of 100

By June 14, 2022 No Comments

Check out the video below to learn about Wall Street’s Rule of 100…

 

Are you trying to determine how much of your money should be invested in the stock market? Be careful not to fall victim to Wall Street’s many rules. Most notably, the Rule of 100. The age-old rule of 100 is a concept that places every saver into a generic one-size-fits-all approach to ‘retirement planning.’

The rule states: Beginning with 100, subtract your age – this number gives you the percentage of your money that should be invested in stocks (equities) within your portfolio.

Let’s take a moment to identify how risky this really could be for a Saver. For example, say that you are 60 years old. By this equation, you should be putting 40% of your 401k into the stock market. For an Investor this may be a good idea, but for a Saver it just does not make sense… that amount of risk exposure would cause the Saver to lose sleep!

If that number already had you uncomfortable, get a load of their “new and improved” version of this rule. The “new” rule uses 120!

The equation is exactly the same, only you begin with 120. So, 120 – Your Age = % in the Stock Market. Take that same 60-year-old and this equation now has them putting 60% into the stock market. This is just too much market exposure for a Saver’s risk tolerance.

Historically, bonds used to be the safe alternative to equities in an investment account, however, they are also at risk currently due to interest rate risk.

Don’t fall victim to silly rules or equations when it comes to your retirement. At Tony Walker Financial, there is no one-size-fits-all planning. We are here to create a personalized game plan so that no matter how long you live in retirement, you won’t run out of money!

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