Phil Cannella – Phillip Cannella Blogs: Phil Cannella has devoted his life to helping American retirees retire safely and securely, because he knows that a retirement savings that took a lifetime to build can disintegrate before your eyes.
One thing Phil Cannella teaches his readers is how to better understand The Rule of 100, which has been in place for over 70 years, and for good reason. It is a guideline financial advisors use to determine how much an investor should subject their assets to risk. While it is meant for all age groups, retirees should pay particular attention to it.
The rule works off of the following formula:
100 – YOUR CURRENT AGE = % OF RECOMMENDED RISK
Here is an example: At 80 years old, you should have no more than 20% of your money in risky (aggressive) stocks, bonds and mutual funds, and 80% of your assets in conservative accounts.
While the Rule of 100 will generally safeguard your retirement, Phil Cannella makes it clear that following the rule isn’t enough to crash proof your nest egg because it is still subject to the effects of market fluctuations, making your principal subject to those same effects. In other words, if the market is booming, your large share of safe accounts will increase slowly, while your small share of risk accounts will skyrocket. On the other hand, if the market down, both will drop, and your risk accounts in particular will take a hit.
Using the example above, in a down market, 20% of your nest egg would be exposed to losses, and that’s money you will need in your retired years. Phil Cannella shows his readers how to keep 100% of their nest egg in his book, Crash Proof Retirement: The Planning Isn’t Over.