Planning your financial future can be intimidating, which may be why almost half of all Americans lack a concrete retirement plan.

However, developing a strong retirement strategy now will pay dividends in the future, and, luckily, the process is not as difficult as it might seem. In reality, creating your retirement fund can be as simple as color-coding your finances based on what is at-risk, what is protected, and what is readily available.

The first step in the color-coding strategy is to calculate exactly how much you should set aside and in what ways that money will be used — whether that’s savings accounts, stocks, bonds or other investments.

At Capital Financial Advisory Group, financial advisors like Marty Hensley help clients calculate the breakdown of this number by using the Rule of 100, a savings strategy based on age.

“What we do is take 100 minus your current age. In our minds, that result is the maximum amount of money that should be at risk,” Hensley said. “To simplify that, if someone came in and said, ‘I have $1 million, and I am 70 years old.’ One hundred minus 70 is 30, so that individual would have $300,000 at risk, and they would have $700,000 protected.”

He continued, “We use those numbers in combination with each other. That protected money is where the client has reliable, predictable income and retirement funds, and they know that a major portion of their investment portfolio is protected against loss.”

In determining the distinction between at-risk versus protected money, it’s simple: protected money isn’t subject to the risk of the overall market and is often insured against loss, while at-risk money can lose its value at any time.

To put this concept into practice, imagine you have three buckets. One — the at-risk money — is red. Another —the protected money — is green. The last bucket — yellow — contains three to six months’ worth of living expenses, which is always available, but has no real chance of gain. By utilizing the Rule of 100, you should be able to calculate exactly how much money you should have in each bucket.

“If that investment can lose value, we put that in the risk bucket — red money is 100 percent at-risk. Anything in the green bucket — what we call our personal pension bucket — is safe and has 100 percent principal protection against any loss and is not subjected to the risk of the overall market. The yellow bucket is about three to six months’ worth of living expenses,” Hensley said. “At Capital Financial, we think that there should be a combination of the money that’s in the red, green and yellow bucket, and the amount of which varies depending on age.”

For example, if an individual was 60 years old, based on the Rule of 100, they should have 40 percent of their money in the red, at-risk bucket, perhaps invested in the stock market; and 60 percent in the green, protected bucket, like a savings account. Money in a savings account is relatively safe from risk and can build interest, while money in the stock market is affected by daily fluctuations and has the potential to skyrocket or plummet in a short time.

As individuals age into their 60s and retirement grows closer, risk becomes more dangerous, making mitigation of the red bucket the focus of any financial strategy. For those who are thinking ahead for retirement at a young age, however, there’s more freedom to explore those risks. While it’s wise to get started on retirement planning sooner rather than later, it’s never too late, and utilizing the color-coded bucket strategy helps simplify an often intimidating process.

“We’ve been doing this for a while and our bucketing strategy is primarily for education. We can help people see where their money is currently, and then — if we know where it is — we can have a guide moving forward,” Hensley said. “At that point, it’s easy to say, ‘Well, at least I understand how much of my money is at risk, how much is protected and how much I have in the bank.'”