How does the traditional '100 minus your age' asset allocation rule work for a 75-year-old investor?

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For a 75-year-old investor, the '100 minus your age' rule dictates a portfolio allocation of 25% equities and 75% fixed income or cash equivalents.

• Practical Calculation Subtracting your age of 75 from 100 yields 25, which represents the percentage of your portfolio that should remain invested in stocks. The remaining 75% should be allocated to lower-risk assets such as government bonds, investment-grade corporate debt, or high-yield savings accounts.
• Prioritizing Capital Preservation This heuristic is designed to minimize volatility as you age. With a 75% allocation to bonds and cash, your portfolio is structured to withstand market downturns better than an all-stock portfolio, protecting your principal from severe drawdowns during unexpected economic shocks.
• Income Generation Focus At this stage, the focus shifts from long-term compounding to generating steady income. The 75% bond-heavy portion should be managed to provide regular cash flow to cover living expenses, reducing the need to sell equities during market declines to fund your lifestyle.
• Flexibility for Longevity It is important to remember that this rule is a simple starting point. Given that many investors in the UK and US now live into their 80s and 90s, you may need to maintain more equity exposure than the formula suggests to combat inflation and fund a longer retirement. Consider adjusting the ratio based on your specific health, other income sources like Social Security or state pensions, and personal risk tolerance.

admin · 2026-10-12 01:43:38