A Crash Proof Retirement and the Rule of 100

How to Crash Proof Your Retirement?

The first step to crash-proofing any retirement is replacing risk-class investments with fixed-class investments. This means reducing your exposure to stocks, bonds, and mutual funds and instead, protecting your hard-earned nest egg with investments that guarantee principal protection while generating market like returns.

What are the Crash Proof investments?

As you move into retired years, the amount of risk tied up in your assets should shrink. Crash-proof investments are principal protected vehicles based in the financial life insurance industry. These fixed-class investments credit interest, whereas risk-class investments experience unrealized gains. To fully understand how much of your portfolio should consist of fixed-class investments, follow the Rule of 100.

The Rule of 100 is a basic formula that provides a guideline with regard to how much of one’s assets should be subject to risk, and how much should be in more conservative accounts. Simply take the number 100 and subtract your current age. The answer tells you the maximum percentage of risk that should be in your portfolio. Therefore, if you’re 80 years old, no more than 20% of your nest egg should be exposed to risk assets. Following this rule is the best strategy to achieve a crash-proof retirement.

This crash-proof strategy may vary for different individuals based on their income needs and financial situation; some investors’ personal situations will dictate a smaller risk tolerance, while others may allow for a greater exposure to risk — but beware of a stock market crash!

What are Crash Proof Vehicles?

A stock market crash is identified as the New York Stock Exchange falling more than 20%. Investors do not need a market crash to happen to lose significant amounts of money with Wall Street. Risk-class investors often find themselves inundated with hidden fees and up-front costs that limit the upside growth of their portfolio. This is especially harmful for Americans in or near retirement who do not have the time to reaccumulate lost portions of their nest egg with earned income.

A safe alternative strategy, consisting of fixed-class investments, are immune to market crashes, or any loss on the market in general. When Wall Street is on the rise, fixed-class investments generate market like returns as credited interest, which compounds on the investors’ principal in the succeeding year. As the stock market falls, fixed-class investments stay level, earning no less than a zero.

How Can I Learn More?

If you are in or near retirement and want to learn more about how a crash-proof strategy can protect your nest egg from the dangers of stock market volatility, risk, and fees, contact Crash Proof Retirement today! To schedule an appointment with a licensed retirement phase educator, call 1-800-722-9728 or request an appointment online by filling out the contact form on this page. Appointments are available in-person or through easy-to-use video conferencing!