Understanding the Rule of 120

By Brent Meyer — SafeMoney.com Founder & Editor Reviewed by Licensed Financial Professionals  |  SafeMoney.com — Trusted Since 2011  |  Updated Regularly Quick Answer: Learn about the Rule of 120 for retirement planning. Discover how to balance risk with safe money alternatives. Start planning today! Related Articles Retirement Planning Services | Retirement Planning Retirement Planning For Women | Retirement Planning Retirement Income Planning | Retirement Planning Retirement Tax Planning | Retirement Planning Key Takeaways The Rule of 120 helps determine your ideal asset allocation for retirement. Subtract your age from 120 to find the percentage of stocks to hold. Consider guaranteed solutions for a balanced retirement portfolio. Utilize retirement calculators to assess your financial readiness. Consult a SafeMoney certified advisor for personalized retirement strategies. Quick Answer The Rule of 120 is a retirement planning strategy that helps determine the ideal mix of stocks and safe money alternatives based on age. By subtracting your age from 120, you can adjust your investment risk as you grow older. SafeMoney Editorial Team  |  Reviewed by Licensed Financial Professionals  |  Updated Regularly Understanding the Rule of 120 The Rule of 120 is a popular guideline in retirement planning that assists in balancing risk and security. By subtracting your age from 120, you determine the percentage of your investment portfolio to allocate to stocks, with the remainder going into safe money alternatives like fixed annuities. This approach helps manage risk by reducing exposure to market volatility as you age. How the Rule of 120 Works As a starting point, the Rule of 120 provides a framework for adjusting your investment strategy over time. For instance, a 30-year-old would allocate 90% of their portfolio to stocks, while a 70-year-old would reduce this to 50%. This shift reflects the need to protect accumulated wealth as retirement approaches, emphasizing the importance of safe money alternatives. Benefits of the Rule of 120 One of the main advantages of the Rule of 120 is its flexibility. It allows for adjustments based on individual risk tolerance and financial goals. By gradually shifting investments from stocks to safer options, retirees can better safeguard their assets against market downturns, ensuring a more stable financial future. Comparing the Rule of 120 and the Rule of 100 Aspect Rule of 120 Rule of