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Asset allocation by age: A practical glide path
A practical stock/bond glide path, decade by decade. Plus the three-fund portfolio that makes this trivial to actually execute.
Asset allocation — your stock/bond split — drives the vast majority of your portfolio's risk and return. It matters more than picking the "right" funds. More than market timing. More than tax-loss harvesting. Get this one decision roughly right, then automate everything around it.
The baseline glide path
We use 120-minus-age in stocks as the baseline — more aggressive than the older 100-minus-age rule, because retirements now last 30+ years and bond yields have been lower than historical averages for the past two decades.
| Age | Stocks | Bonds | Notes |
|---|---|---|---|
| 20s | 90–100% | 0–10% | Maximum equity. 40-year time horizon. |
| 30s | 85–90% | 10–15% | Still very aggressive. Start adding bonds at age 35. |
| 40s | 75–80% | 20–25% | Peak earning years. Begin meaningful diversification. |
| 50s | 65–70% | 30–35% | Critical decade — sequence-of-returns risk starts mattering. |
| 60s (pre-retirement) | 55–60% | 40–45% | Build a 2–3 year cash/bond bucket for early retirement. |
| 65 (retirement) | 50–55% | 45–50% | Glide-path low point; still need 50%+ stocks for 30-year horizon. |
| 70s+ | 40–50% | 50–60% | Mostly stable; tilt slightly more conservative if portfolio is large. |
Why we don't use 100-minus-age anymore
The classic "100 minus age in stocks" rule was articulated when:
- Average US life expectancy at 65 was ~14 more years (now ~20).
- Bond yields averaged 5–7% (today's nominal Treasury yields are ~4%, real yields under 2%).
- Retirements often meant a pension + Social Security + modest savings, not portfolio-funded withdrawals.
All three have flipped. Modern retirees need their portfolio to last longer, with bonds generating less, and few have pensions. The math just doesn't support 60% bonds at 65 anymore.
The three-fund portfolio
The simplest implementation that delivers on this glide path is the three-fund portfolio: total US stocks + total international stocks + total US bonds.
Example: age 35, target 85/15.
- 60% US total stock market (VTI / FZROX / VTSAX)
- 25% international total stock (VXUS / FZILX / VTIAX)
- 15% US total bond (BND / FXNAX / VBTLX)
Example: age 55, target 70/30.
- 50% US total stock market
- 20% international total stock
- 30% US total bond
That's it. Three funds, rebalanced annually, with new contributions directed to the underweight bucket. Decades of research show that adding fund #4, #5, or #6 rarely improves risk-adjusted return enough to justify the complexity.
How risk tolerance shifts the dial
The glide path above is a baseline. Adjust ±10 percentage points in stocks based on your honest answer to: "If my portfolio dropped 35% in 12 months, what would I do?"
- "Keep buying more." Add 10 points to your equity %.
- "Stay the course, don't change anything." Use the baseline.
- "I'd panic-sell." Subtract 10 points. Going more conservative protects against the worst behavioral mistake — selling at the bottom.
The right allocation isn't the most mathematically optimal one. It's the one you'll actually hold through a bear market without panic-selling.
Sequence-of-returns risk — why your 50s and 60s matter most
The order of returns matters far more in your withdrawal years than in your accumulation years. Two retirees with the same average 30-year return can have wildly different outcomes if one experienced bad returns early in retirement and the other experienced them late.
A 2000-retiree who held 80% stocks took a 50%+ portfolio drawdown in 2000–2002, started withdrawing 4%/year anyway, and many ran out of money by 2020. A 1990-retiree with the same allocation rode strong returns up front and ended 30 years with more money than they started with.
Mitigation: in the 5 years before and after retirement, your bond allocation matters most. A 30–40% bond cushion lets you draw from bonds during equity bear markets while stocks recover. That's why the glide path bottoms at 50/50, not 80/20.
The bucket strategy (retirement)
Some retirees implement asset allocation as three "buckets" rather than percentages:
- Bucket 1: Cash + short-term. 1–2 years of expenses in HYSA, money market, or short-term bonds. Drawn down for monthly living expenses.
- Bucket 2: Bonds + intermediate. 5–7 years of expenses in total bond market funds. Refills bucket 1 every 1–2 years.
- Bucket 3: Stocks. Everything else, fully invested in equities. Refills bucket 2 every 3–5 years (or when stocks are up).
Functionally identical to a percentage-based allocation, but psychologically easier in bear markets — you're not "selling stocks at a loss," you're using your "cash bucket" that was always meant for this.
Rebalancing — when and how
- Calendar rebalance once per year. Pick a date (birthday, year-end), check actual vs. target, sell overweights, buy underweights.
- Threshold rebalance. Rebalance whenever any asset class drifts more than 5 percentage points from target. (80/20 portfolio → rebalance when stocks hit 85% or 75%.)
- Cash-flow rebalance. Direct new contributions to the underweight bucket. This handles most rebalancing without ever selling.
Where to rebalance
Always rebalance in tax-advantaged accounts first (401(k), IRA, Roth IRA, HSA) — they're tax-free trades. Avoid rebalancing in a taxable brokerage account unless you're tax-loss harvesting; selling appreciated positions in taxable triggers capital gains.
Robo-advisors as a one-decision solution
If you don't want to manage allocation yourself, a robo-advisor will set the allocation from a questionnaire and rebalance automatically:
Or if you'd rather hold the underlying index funds yourself (lower fees, more flexibility), open at one of the major brokerages and use a target-date fund or three-fund portfolio:
Open a Fidelity account → Vanguard Schwab
What about gold, crypto, alternatives?
Most diversified investors don't need any alternatives. If you want exposure for psychological diversification:
- Gold: 0–5% of portfolio. Inflation hedge, but long-term real returns are near zero.
- Bitcoin: 0–3% of portfolio if you can stomach extreme volatility. Treat as a speculative asset, not a core holding.
- REITs: Already in total stock market index funds via real-estate stocks. A dedicated REIT allocation is optional, not required.
None of these change the core glide path. They're rounding errors on top.
The bottom line
- 20s/30s: 85–100% stocks. Maximum equity exposure during the longest compounding window.
- 40s: 75–80% stocks. Begin meaningful bond diversification.
- 50s: 65–70% stocks. Build the bond cushion that protects against sequence-of-returns risk at retirement.
- 60s/70s: 50–60% stocks. Lower glide-path floor, but never go full conservative — your portfolio still needs to last 30 years.
Use a three-fund portfolio (US stocks / international stocks / US bonds) or a single target-date fund. Rebalance once per year. Direct new contributions to the underweight bucket. Don't panic in bear markets.
Related reading
Frequently asked questions
- What's the 100-minus-age rule?
- An old heuristic: subtract your age from 100 and that's your stock %. At 30, hold 70% stocks. At 60, hold 40%. Most modern advisors use 110 or 120 minus age instead, since retirements now last 30+ years and bonds yield less than they did historically. We use 120-minus-age as the baseline in this article.
- Why have stocks at all if I'm close to retirement?
- Because retirement isn't a single moment — it's 25–35 years of withdrawals. A 65-year-old retiree needs portfolio growth to outlast inflation through their late 80s/90s. The classic mistake is going 'all bonds' at retirement and watching purchasing power erode for three decades.
- What counts as 'bonds' in this context?
- Investment-grade fixed income — typically a total bond market index fund (BND, FXNAX, AGG) holding US Treasuries and investment-grade corporates. Stable-value funds, money-market funds, and short-term CDs also count as the 'safe' side of the portfolio in retirement.
- Should I add international stocks?
- Yes — most advisors recommend 20–40% of the equity sleeve in international stocks (VXUS, IXUS, VTIAX). For simplicity, you can also use a total world stock fund (VT) which is automatically ~60/40 US/international. Don't overthink the international % — anything between 20% and 50% of equities is reasonable.
- What about target-date funds?
- Target-date funds (Vanguard Target Retirement, Fidelity Freedom Index, Schwab Target) execute this glide path automatically. They adjust the stock/bond mix yearly based on the target retirement year. If you don't want to manage allocation yourself, a single target-date fund is the cleanest one-decision solution.
- How often should I rebalance?
- Once per year, or whenever any major asset class drifts more than 5 percentage points from target. Many investors rebalance automatically with new contributions (buy the underweight asset class). Tax-advantaged accounts are the cheapest place to rebalance since there's no capital gains tax on the sale.