Asset Allocation by Age: The Table and Its Limits
"110 minus your age" is a starting point that ignores the two things that actually matter: when you need the money, and what you did last time it fell 30%.
The rule is "110 minus your age in stocks". It is a reasonable starting point, it is used because it is easy to remember, and it is a proxy for two things you can measure directly. Once you have measured them, the rule has done its job.
The conventional table
| Age | Stocks | Bonds |
|---|---|---|
| 25 | 85% | 15% |
| 35 | 75% | 25% |
| 45 | 65% | 35% |
| 55 | 55% | 45% |
| 65 | 45% | 55% |
You will also see "100 minus your age", which is the older version and about ten points more conservative at every line, and "120 minus your age", which is the version written after a long run of rising markets. The spread between them tells you something: nobody knows the right number, and the difference between 65% and 75% stocks at 45 is not what decides your retirement.
The SEC's plain description of asset allocation is worth reading for what it does not say: it gives no ages and no percentages, because the regulator is not in a position to know your horizon.
What the rule is a proxy for
Age correlates with two things that actually determine the answer, and it correlates imperfectly with both.
Time horizon. A 30-year-old usually has 35 years before the money is spent, and a 65-year-old usually has less. Usually. A 30-year-old buying a house in two years has a two-year horizon for that money, and a 65-year-old whose first withdrawal is at 75 has a longer horizon than the table gives them.
Risk tolerance, meaning behaviour rather than opinion. Younger investors are assumed to tolerate falls better because they have time to recover and a salary still coming in. Some do. The ones who sold at the bottom of the last fall did not, and their age did not help them.
So the rule is useful in exactly one situation: you do not yet know your horizon or your behaviour, and you need an allocation today. Use it, and replace it when you know better.
The two variables that matter more
Time horizon is the hard constraint, and it overrides age in both directions. Money needed in under three years does not belong in stocks whatever the table says, which is the whole argument in where to keep your emergency fund and the reason a house deposit sits in cash. Money not needed for thirty years can hold a lot of stock at any age.
Behaviour is the soft constraint, and it is the one that does the damage. An allocation you abandon halfway down is strictly worse than a more conservative one you keep, because you took the fall and then missed the recovery. This is not a character flaw to be corrected by reading more. It is a fact about you, and the portfolio should be built around it.
Four investors, same age, different answers
Four 40-year-olds. The table gives them all 70/30.
| Investor | Situation | Reasonable allocation |
|---|---|---|
| A | Tenured, pension on top, no withdrawals before 65, held through the last fall and kept buying | 80% to 90% stocks |
| B | Commission income, no pension, sold in the last fall and returned a year later | 60% stocks, and automate it |
| C | Stable job, but $90,000 of it is earmarked for a house in three years | The $90,000 in cash; the rest at 80% stocks |
| D | Plans to stop work at 50 and live on the portfolio | Nearer 60/40, because the withdrawal date is ten years away |
Investor C is the one the table handles worst. Averaged across the whole balance their allocation looks conservative, but the two pots have nothing to do with each other and should never be averaged. Allocation is a question you answer per goal, not per person.
Testing your allocation against a real drawdown
The table is abstract. This is not. Take a $200,000 portfolio and apply a shock of 35% to the stocks and 10% to the bonds, which is a severe but unremarkable bad year.
| Allocation | Value after | Loss | Fall |
|---|---|---|---|
| 100% stocks | $130,000 | $70,000 | 35.0% |
| 90/10 | $135,000 | $65,000 | 32.5% |
| 80/20 | $140,000 | $60,000 | 30.0% |
| 70/30 | $145,000 | $55,000 | 27.5% |
| 60/40 | $150,000 | $50,000 | 25.0% |
| 50/50 | $155,000 | $45,000 | 22.5% |
Two things are worth sitting with. The first is that the protection is smaller than people expect: moving from 100% stocks to 60/40 cuts the loss by $20,000 out of $70,000, not by most of it. Bonds reduce the fall, they do not remove it.
The second is the trade-off, and it runs the other way. Over long periods a higher stock share has historically produced more, which is why the comfortable allocation is not free. You are paying for the smaller fall with expected return, and the payment is real.
Now the test. Look at the row you are in and read the dollar loss, not the percentage. Would you have kept contributing that month? If not, move up the table until the answer is yes, and treat that as your allocation. That is what the diversification argument is for and it is what a three-fund portfolio implements in practice.
Keeping it where you put it
An allocation drifts on its own, and it drifts towards more risk, because the part that grows fastest becomes the largest part. A 60/40 portfolio left alone for a decade at plausible returns ends up near 72/28 without a single decision being made. Putting it back is rebalancing, and once a year is enough.
If you would rather not, a target date fund is this table with the drift handled for you, and the reason to check the glide path is that two funds with the same year on the label can differ by fifteen points of stock at that year.
When this does not apply
If the money has a date. A deposit, a tuition bill, a planned sabbatical. Dated money is a cash question, not an allocation question, whatever your age.
If this is your emergency fund. It is not part of the portfolio. It is insured cash, and the table is not about it.
If you have a pension covering your essential costs. A guaranteed income floor genuinely changes the calculation, because the portfolio is funding discretionary spending rather than rent. More stock is defensible.
If you are within five years of drawing on it. The order of returns starts to matter as much as their average, because a fall you have to sell into is permanent in a way that a fall you can wait out is not.
If your plan does not offer the funds. Some workplace plans have no low-cost bond option. Hold the bonds elsewhere and read the accounts as one portfolio rather than compromising in the plan.
Next steps
- List every pot separately, with the year you expect to spend it.
- Take any pot with a date inside three years out of the portfolio entirely.
- For what is left, start at 110 minus your age.
- Run the drawdown table on your actual balance and read the dollar figure.
- Adjust until you would keep buying at that number, then write it down.
- Set one annual date to put it back where you wrote it.
Sources and assumptions. The description of asset allocation is the SEC's, from Investor.gov's asset allocation and diversification entries. The "110 minus your age" rule is a convention rather than a regulatory position, and no source endorses it. The drawdown table applies a stated shock of 35% to stocks and 10% to bonds to a $200,000 balance; it is arithmetic on an assumption, not a forecast and not a description of any particular past year. The drift figure assumes stocks at 9% and bonds at 3% a year, which are illustrative rates. Checked 20 September 2026.
