Ask the Hammer: Should I Use the 100-Minus-My-Age Rule-of-Thumb to Determine My Asset Allocation?

Robert Powell, CFP®

How much of your money should be invested in stocks, bonds and cash? Should you use the 100-minus-your-age rule-of-thumb? That was, in essence, the nature of a recent question from a reader.

And the short answer, according to Jeffrey Levine, director of advanced planning at Buckingham Wealth Partners, is no. 

In fact, you should "throw the 100-minus-your-age rule-of-thumb out the door. "I don't even know how much it applies today anymore," says Levine. 

Why so? For one, people are living longer and that means they may have to take more risk in their portfolio. And two, rules-of-thumb are fine if you're speaking to thousands of people but it's not good advice for individuals. "It's not advice," says Levine. "It's a rule of thumb."

How much should you invest in stocks, bonds and cash?

According to Levine, the answer to that question depends on your goals and how the money needs to last. thing on that money, the rest of your life. "And so," Levine says, "the question really becomes: Do you want to take risks when it's not necessary? And there's no right or there's no wrong answer."

It just comes down, he says, to what are your most important goals  and what gives you the greatest likelihood of achieving those goals? "It's not about who dies with the most money at the end of the day," he says. "It's about who enjoys their life and achieves more of their goals. And sometimes those things lead us down different paths."

So, can you do this - create an asset allocation - on your own?

According to Levine, many people would benefit from that talking to a financial professional. "It might be just a checkup," he says. "It doesn't have to be a forever engagement."

Others, however, could certainly do this on their own, says Levine.

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