What does the "100 - Your Age" Rule refer to in retirement planning?

The "100 - Your Age" Rule is a guideline used in retirement planning to help individuals determine the appropriate allocation of their investment portfolio between stocks and bonds as they age. According to this rule, you subtract your age from 100 to find the percentage of your investments that should be allocated to stocks, with the remainder being allocated to bonds. For example, if you are 30 years old, according to the rule, you should invest 70% of your portfolio in stocks and 30% in bonds. This strategy reflects the principle that younger investors can afford to take more risks in the stock market due to their longer investment horizon, whereas older investors should become more conservative as they approach retirement to preserve capital.

This explanation highlights how the rule adjusts investment strategy over time, advocating for a balanced approach that takes into account the investor's age and risk tolerance.