A Simple Way to Think About Risk as Retirement Nears

As retirement gets closer, many people begin asking an important question:
Do I have enough money AND am I protecting what I’ve already saved for retirement?

There is no one-size-fits-all answer. However, one long-standing guideline continues to resonate because of its simplicity and clarity: the Rule of 100.

The Rule of 100 is a starting point for conversation, not a rigid formula. It helps people begin thinking about risk, timing, and the importance of protecting a portion of what they’ve worked so hard to build.

What Is the Rule of 100?

The Rule of 100 is a traditional guideline used to think about asset allocation as we age.

The idea is simple:

• Subtract your age from 100.
• The result represents the percentage of your portfolio that might be allocated to growth-oriented investments.
• The remaining portion is allocated to more conservative or “safe” investments

For example: A 60-year-old might consider having roughly 40% in growth investments and 60% in more stable investments

The purpose of the rule is not precision. It’s awareness.

Why the Rule of 100 Still Matters

One reason the Rule of 100 continues to be relevant is because it is easy to understand. Retirement planning can feel overwhelming, and a simple guideline can help people take a first step toward evaluating risk.

Another reason is behavioral.

When markets are performing well, it’s very common for investors to hesitate to reduce risk. The thinking often sounds like this:

“What if I move money to something safer and miss out on future gains?”

That concern is understandable. But it only tells half the story.

The Tradeoff: Missing Gains vs. Risking Losses

As retirement approaches, the consequences of a market downturn change.

Yes, if markets continue rising, there is a possibility of earning less on the portion of money moved into safer assets. But history has shown that markets don’t move in a straight line.

The greater risk near retirement of often not missing upside, but experiencing a significant loss at the wrong time.

A major market decline just before or early in retirement can have lasting consequences:

• Delayed retirement dates
• Reduced retirement income
• Adjusted lifestyle expectations
• Increased stress and uncertainty

We’ve seen many individuals forced to change retirement plans, not because they didn’t save enough, but because too much of their savings remained exposed to market risk when recovery time was limited. Market declines aren’t the only concern near retirement. Long term risks like inflation can also affect purchasing power over time.

Why Having “Some Money Safe” Matters

The Rule of 100 helps introduce a critical idea: Not all retirement money needs to take the same level of risk.

As retirement nears, many people find value in knowing that:

• A portion of their savings is protected from market volatility.
• Near-term income needs are not fully dependent on market performance.
• They have flexibility during market downturns without making emotional decisions

“Safe” does not mean avoiding growth entirely. It means understanding which dollars are meant for growth and which are meant to provide stability. This idea connects closely with true diversification in retirement, where different portions of a portfolio are designed to serve different purposes as markets change.

Understanding Riskier vs. Safer Investments

Without getting into specific products, it can be helpful to think in broad categories:

• Riskier investments tend to fluctuate more and are more exposed to market swings
• Safer investments are generally designed to preserve value, reduce volatility, and provide predictability

Both can play an important role. The key is to decide how much risk makes sense for your current stage of life, especially as retirement approaches.

Common Criticisms of the Rule of 100 — and Why It’s Still Useful

Some critics argue that the Rule of 100 is:

• Too simple for modern markets.
• Not personalized enough.
• Based on age rather than individual circumstances.

Those criticisms are fair, if the rule is used in isolation.

The Rule of 100 was never intended to be a complete retirement strategy. Its strength lies in helping people recognize a key reality: as retirement approaches, the impact of losses often matters more than the potential for additional gains.

At BRACE Financial, we view the Rule of 100 as a starting point for conversation. It helps people pause and evaluate whether a portion of their savings should be positioned more conservatively, especially if those dollars may be needed in the near future.

For many people, talking through these questions with a financial advisor can help bring clarity and confidence as retirement approaches.

A Starting Point, Not a Final Answer

Everyone’s situation is different. Retirement planning involves more than a single rule and should reflect:

• Goals and Timelines
• Income Needs
• Comfort with Market Fluctuation
• Long-term priorities

The Rule of 100 helps people begin thinking about these issues, but meaningful planning happens through thoughtful discussion and personalized plans. Many retirement challenges stem from misunderstandings about risk and timing, which is a theme we further explore when discussing two common retirement mistakes investors often make.

The Takeaway

The Rule of 100 is valuable because it is simple, intuitive, and focused on risk awareness. It helps people recognize that as retirement gets closer, protecting part of their savings can be just as important as growing it.

If you’re unsure whether your current level of risk aligns with your retirement goals, a conversation with a financial advisor can help clarify your options and priorities.

Frequently Asked Questions: The Rule of 100

What is the Rule of 100?

The Rule of 100 is a simple guideline used to think about risk as retirement approaches. It suggests subtracting your age from 100 to estimate how much of a portfolio might be exposed to growth, with the remaining portion positioned more conservatively.

Is the Rule of 100 a retirement strategy?

No. The Rule of 100 is not a complete retirement strategy. It is intended as a starting point to help people think about risk, timing, and the potential importance of protecting a portion of their savings as retirement nears.

Why does the Rule of 100 focus on age?

Age is used as a simple reference point to reflect how recovery time from market losses changes as retirement approaches. As time horizons shorten, the impact of losses may matter more than the potential for additional gains.

Does the Rule of 100 mean avoiding growth in retirement?

No. The Rule of 100 does not suggest avoiding growth entirely. Instead, it highlights the idea that not all retirement savings need to take the same level of risk, especially for dollars that may be needed in the near term.

Why is protecting some retirement savings important?

As retirement approaches, having a portion of savings less exposed to market volatility can provide flexibility and help reduce the need to make emotional decisions during market downturns.

Is the Rule of 100 right for everyone?

The Rule of 100 is a general guideline and may not reflect individual goals, timelines, income needs, or comfort with market fluctuations. It is most useful as a conversation starter rather than a one-size-fits-all rule.

How can a financial advisor help with understanding the Rule of 100?

A conversation with a financial advisor can help put the Rule of 100 into context and determine how it relates to an individual’s goals, timeline, and comfort with risk as retirement approaches.