Asset Allocation by Age Guide
Learn how to adjust your stock/bond mix as you age to balance growth and risk throughout your investing journey.
What is Asset Allocation?
Asset allocation is how you divide your portfolio among different asset classes—primarily stocks, bonds, and cash. It's the single most important decision you'll make as an investor, accounting for 90%+ of portfolio return variation according to research.
The core idea: stocks offer higher expected returns but more volatility; bonds offer stability but lower returns. Your allocation balances these trade-offs based on your time horizon and risk tolerance.
Why it matters: A portfolio that's too aggressive might suffer devastating losses right before you need the money. Too conservative, and you might not reach your goals. Asset allocation finds the right balance for your situation.
Age-Based Allocation Rules
Several rules of thumb help determine stock/bond allocation based on age:
The Classic "100 Minus Age" Rule
Your stock percentage equals 100 minus your age. At 30, hold 70% stocks. At 60, hold 40% stocks. Simple but may be too conservative given longer lifespans.
The Updated "110 Minus Age" Rule
More aggressive: stock percentage equals 110 minus your age. At 30, hold 80% stocks. At 60, hold 50% stocks. Better reflects longer life expectancy and low bond yields.
The "120 Minus Age" Rule
Most aggressive common rule: 120 minus age in stocks. At 30, hold 90% stocks. At 60, hold 60% stocks. Suitable for those with high risk tolerance or other income sources in retirement.
These are guidelines, not mandates. Your optimal allocation depends on risk tolerance, other income sources (pension, Social Security), and when you need the money. Some 60-year-olds should hold 70% stocks; some 30-year-olds should hold 60%.
Suggested Allocation by Decade
Glide Paths Explained
A glide path is a systematic plan for reducing stock exposure as you age. Target-date funds automate this—if you buy a "2050 Fund," it automatically becomes more conservative as 2050 approaches.
Typical Target-Date Fund Glide Path
Types of Glide Paths
- To retirement: Stock allocation reaches lowest point at retirement date
- Through retirement: Continues reducing stocks into retirement (more common)
- Rising equity: Some increase stocks in later retirement (controversial)
Other Factors Beyond Age
Age is just one input. Consider these factors when setting your allocation:
Risk Tolerance
How you'd react to a 40% drop
- Can you sleep during crashes?
- Would you panic sell?
- Are you checking daily?
Time Horizon
When you'll need the money
- 10+ years: More stocks OK
- 5-10 years: Moderate
- <5 years: Conservative
Other Income
Pension, SS, rental income
- Stable income = more stocks OK
- No pension = more conservative
- Working in retirement = more flexible
Frequently Asked Questions
The 100 minus age rule suggests your stock allocation should equal 100 minus your age. A 30-year-old would hold 70% stocks and 30% bonds. Many financial planners now recommend 110 or even 120 minus age due to longer life expectancies and historically low bond yields.
It depends on your age, risk tolerance, and goals. Young investors (20s-30s) often hold 80-100% stocks. Middle-aged investors (40s-50s) might target 60-80% stocks. Those near or in retirement (60s+) often hold 40-60% stocks to reduce volatility while maintaining some growth potential.
Target-date funds are excellent for hands-off investors. They automatically adjust your allocation as you age, provide instant diversification, and require no maintenance. The trade-off is slightly higher fees and less control. For most investors, especially in retirement accounts, they're a solid choice.
Annual rebalancing is sufficient for most investors. Some prefer threshold-based rebalancing—adjusting when allocations drift 5%+ from targets. More frequent rebalancing increases trading costs and taxes without significantly improving returns.
Track Your Asset Allocation
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