Your time horizon is the number of years you have until you plan to retire. To determine your time horizon, subtract your current age from your anticipated retirement age.
It’s important to consider your time horizon when deciding the investment options that are best for you. The appropriateness of an investment depends largely on how long you have until you need to access your money.
Time Horizon Example
Charles has 20 years until retirement, which means he has a long time to “ride” the potential highs and lows of a stock investment. Therefore, Charles has time to take advantage of the stock market’s historical long-term financial performance.
Jean has only a few years until retirement. Therefore, Jean should consider protecting herself against sudden changes in the market by investing in lower risk investments, such as money market securities or high-rated bonds.