For example, if you're 30, then 110 minus your age would be 80 -- so 80% of your contributions should go into buying stocks with the remainder in bonds.
Of course, the fact that your different investments will be behaving differently means that the changes in value between those investments will also change the percentage of each type of investment in your portfolio.
For example, let's say that you have set your contributions at 80% stocks and 20% bonds.
When you take a look at your portfolio a year later, it'll probably be something like 82% stocks and 18% bonds because the stock investments have become more valuable and the bond investments have lost money.
And of course, since you're a year older, you'd actually want only 79% of your investments in stocks and 21% in bonds.
Fortunately, this is easy to fix: simply sell a little bit of stock and put that money in bonds instead, and you'll have perfect allocations once more.
Checking for hidden costs The investments you originally chose for your retirement accounts may have been the best possible investments at the time, but within a few years it's possible that they are no longer a good choice for you.
For example, let's say you have two investment options: an index fund returning on average 7% per year with fees of 0.10%, or an actively managed fund returning 7.5% per year with fees of 1%.
That's why it's important to check your fund prospectuses every year to see what's been happening with their fees.
Once you learn how to maximize your Social Security benefits, we think you could retire confidently with the peace of mind we're all after.