Consider the 15/50 Rule for Retirement Planning

Setting up a happy retirement means finding the right investment strategy so you never run out of money during your golden years. Studies show you will need 80% of your pre-retirement income to live on each year in retirement, but knowing the exact number of years that will be has become harder to gauge as our lifespans continue to lengthen.

Many retirement investments rest in funds that set a likely retirement age and automatically get more conservative as that year approaches to make sure there is no last-minute loss. The Own Your Age in Bonds rule, perhaps the most popular retirement investing strategy, does just that: it says that the percentage of bonds you invest in should equal your age, while the rest should be invested in stocks.

This older rule protects against stock market volatility — start out investing aggressively in stocks so the years can drown out any dips in the market. Then, as you reach 55, your portfolio reaches 55% in bonds, often seen as the safer investment, and so on until you retire.

One potential problem with the Own Your Age in Bonds strategy comes when investing in too many bonds leaves you with too few returns. If you miss your target date, you run the risk of outliving your retirement. In answer to growing lifespans, a new strategy has emerged: the 15/50 rule.

"Studies show you will need 80% of your pre-retirement income to live on each year in retirement."

The 15/50 Rule

15/50 was defined by Benjamin Graham, author of The Intelligent Investor, and has been championed by Wes Moss. The rule is simple: if you believe you have more than 15 years left to live, you should own at least have 50% stocks, with the remaining balance in bonds and cash.

The strategy balances risk and reward while giving you a diversified portfolio, leading to growth without falling short. Stocks hedge against inflation while the bonds keep your investments stable. This alternative to the Own Your Age in Bonds Rule is a durable strategy that allows you to rethink your time horizon and make sure you don’t run out of money.

"The 15/50 rule is a durable strategy that allows you to rethink your time horizon and make sure you don’t run out of money in retirement."

There are many vehicles to avoid outliving retirement — annuities, IULs, and the 15/50 rule are just a few. You should always talk to a financial advisor before changing your retirement strategy, but the 15/50 is one to consider bringing up to a professional expert. While this is not meant to substitute professional investment guidance, the knowledge of a new model could help you consider possibilities that accommodate a longer life. The goal is never to run out of money in retirement — as long as you have that security, you will have peace of mind.

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