Most age-based investing advice comes down to one idea: hold more stocks while retirement is far away and more bonds as it gets close. The arguments are about how much and how fast. Simple rules subtract your age from 100, 110 or 120 to get a stock percentage, while target-date funds follow published glide paths that hold more stock for most of a career. This guide sets the two side by side in a worked table, separates the risk your finances can bear from the risk you can stomach, shows why the years around retirement matter most and explains how rebalancing keeps any mix where you put it. It describes frameworks, not a mix for you.
What are the 100, 110 and 120 minus age rules?
Each rule subtracts your age from a fixed number to give the percentage of your portfolio in stocks, with the rest in bonds.
Stock share = 100, 110 or 120 − your age. Bond share = 100% − stock share.
For a 40-year-old, that means 60%, 70% or 80% in stocks. The 100 version is the flip side of owning your age in bonds, a rule Vanguard's founder John Bogle called "a crude starting point" in Common Sense on Mutual Funds: a 65-year-old would consider 65% in bonds and 35% in stocks. The variants subtract 10 or 20 from your age to get the bond share instead, which is the same as holding 110 or 120 minus your age in stocks.
Bogle gave four reasons to own more bonds with age: more wealth to protect, less time to recoup severe losses, a greater need for income and, perhaps, more nervousness as markets jump around. The first two are about capacity for loss, the third about cash flow and the fourth about temperament, which is why the rest of this guide treats those as separate questions.
Much of the case for the higher versions comes from how long retirement can last. Under the Social Security Administration's 2023 period life table, used in its 2026 Trustees Report, a 65-year-old man can expect 18.12 more years and a woman 20.66. About 24% of men and 35% of women who reach 65 live to 90, and if their lifespans were independent, there would be roughly an even chance that at least one member of a 65-year-old couple reaches 90. Money that may have to last 25 years or more must outpace inflation, which is the argument for holding more stock than 100 minus age allows.
How do the rules compare with target-date glide paths?
From the mid-30s to the mid-50s, published target-date glide paths hold more stock than even 120 minus age, then land between the rules around 65. The table puts the three rules beside two published paths for someone who plans to retire at 65.
| Age | 100 minus age | 110 minus age | 120 minus age | Vanguard Target Retirement | BlackRock LifePath Index |
|---|---|---|---|---|---|
| 25 | 75% | 85% | 95% | 92% | 99% |
| 35 | 65% | 75% | 85% | 92% | 99% |
| 45 | 55% | 65% | 75% | 84% | 90% |
| 55 | 45% | 55% | 65% | 69% | 71% |
| 65 | 35% | 45% | 55% | 51% | 40% |
| 75 | 25% | 35% | 45% | 31% | 40% |
Each glide-path figure is the stock share of the fund dated for that person's 65th birthday. Vanguard's are actual holdings on September 30, 2025, from the 2065 fund for a 25-year-old down to the Income fund for a 75-year-old. BlackRock's are the targets in its April 2026 prospectus supplement. All are rounded, and the series are examples rather than a ranking. Target-date funds explains how the designs differ.
Three things stand out. Early on, the glide paths sit near or above the most aggressive rule, because a worker in their 20s or 30s has decades of contributions ahead and relatively little money at stake. In the 20 years before retirement, the paths cut stocks faster than any rule: Vanguard's falls from 84% at 45 to 51% at 65, a drop of 33 points, while every age rule falls by exactly 20. After 65 the two designs part ways, with BlackRock's holding at 40% and Vanguard's continuing down to about 30% by 72.
Worked example: One $300,000 portfolio at 50, four mixes, one bad year
A 50-year-old with $300,000 saved for retirement would hold 50% in stocks under 100 minus age, 60% under 110 minus age and 70% under 120 minus age. Vanguard's 2040 fund, 15 years from its date, held about 76%. Suppose stocks then fall 30% in a year while bonds are flat.
| Mix | In stocks | Loss in the drop | Portfolio afterward |
|---|---|---|---|
| 100 minus age (50% stocks) | $150,000 | $45,000, or 15.0% | $255,000 |
| 110 minus age (60%) | $180,000 | $54,000, or 18.0% | $246,000 |
| 120 minus age (70%) | $210,000 | $63,000, or 21.0% | $237,000 |
| Glide path 15 years out (about 76%) | $228,600 | $68,580, or 22.9% | $231,420 |
The spread between the gentlest and the most aggressive mix is $23,580 in one bad year. The higher stock shares are the ones that gain more when markets rise, which is the trade each rule makes differently.
What is the difference between risk capacity and risk tolerance?
Risk capacity is how large a loss your finances can absorb without derailing your plans; risk tolerance is how large a loss you can live through without selling. The SEC's beginners' guide folds both into one definition, "your ability and willingness to lose some or all of your original investment," but pulling them apart explains why two people of the same age can need different mixes.
The CFA Institute's 2020 guide to risk profiling defines capacity as the financial ability to take a loss without meaningfully lowering your standard of living. It judges that ability from objective facts: cash savings, pension income, insurance, access to credit and how much of your wealth is in the portfolio, along with your time horizon and need for cash. Tolerance is the willingness side, best measured with tested questionnaires and your own record. FINRA puts the gap plainly: the risk you can afford is not necessarily the risk you are comfortable taking.
| Factor | Tends to raise the risk you can take | Tends to lower it |
|---|---|---|
| Time horizon | Decades before the money is needed | A goal within a few years |
| Reliance on the money | Other income covers essential bills | The portfolio is the main source of a near-term need |
| Income and safety net | Stable salary, pension, emergency fund | Irregular income, no cash reserve, heavy debts |
| Temperament and experience | Has held on through past declines | Has sold after past declines, or loses sleep over balances |
Age is only a rough stand-in for the first row. A 35-year-old on commission with no emergency fund and a house purchase planned in three years may have less capacity than a 60-year-old whose pension covers the bills. When capacity and tolerance disagree, the CFA Institute's guide treats a portfolio riskier than the investor can afford as imprudent however willing the investor is, and a mix you cannot stomach tends to be abandoned at the worst moment. In practice, whichever of the two is lower becomes the limit.
Why does no age rule fit everyone?
Age stands in for time horizon, but the right mix also depends on income, other assets, spending needs and how long the money must last. The SEC said as much when it proposed target-date marketing rules in 2010: a glide path that suits one investor may not suit another with the same retirement date, depending on appetite for risk, other investments, retirement and labor income, expected longevity and savings rate.
- Guaranteed income. Bogle treated pension and Social Security payments as bond-like. A retiree whose pension and benefits cover essential spending can hold more of the portfolio in stocks for the same overall risk than one living on withdrawals alone.
- Your job. A steady government salary behaves more like a bond than commission income or a business tied to the economy, which tends to suffer in the same downturns that hit stocks.
- Several goals. A house deposit due in three years and retirement savings due in 30 belong in different mixes, even for the same person.
- The whole household. A spouse's 401(k), an IRA elsewhere and cash at a bank all count toward the mix, even when each account is managed separately.
The SEC's guide is blunt about it: no single asset allocation model is right for every financial goal. A rule of thumb is a reasonable place to start, and the adjustments are where the real decisions sit. For the portfolio-building side, how to build a well-balanced investment portfolio covers spreading money across asset classes, and robo-advisors vs DIY investing compares paying for that work with doing it yourself.
Why does sequence-of-returns risk peak around retirement?
Because a loss just before or after withdrawals begin hits a balance near its peak and forces sales at low prices to pay the bills. Once money is coming out, the order of good and bad years changes the outcome even when the average return is the same; safe investments for retirees works through that effect with a withdrawal example. The allocation question is how much of the balance is exposed when the bad year arrives.
Worked example: A 2008-style year at 64
Take an $800,000 portfolio a year before retirement, with $40,000, or 5% of the balance, planned as the first year's withdrawal. Then a year like 2008 arrives, when the S&P 500 fell about 37%. Assume bonds are flat to keep the arithmetic simple.
| Stock share at 64 | Loss in the year | Balance afterward | $40,000 as a share of the new balance | Gain needed to get back to $800,000 |
|---|---|---|---|---|
| 36% (100 minus age) | $106,560 | $693,440 | 5.8% | 15.4% |
| 46% (110 minus age) | $136,160 | $663,840 | 6.0% | 20.5% |
| 56% (120 minus age) | $165,760 | $634,240 | 6.3% | 26.1% |
| 90% (never cut back) | $266,400 | $533,600 | 7.5% | 49.9% |
The portfolio that stayed at 90% stocks needs a 49.9% gain just to get back to where it started, while the withdrawals keep coming out of a smaller base.
That is the reasoning behind cutting stocks in the decade before retirement, and behind holding a year or more of planned withdrawals in cash or short-term Treasuries so stocks do not have to be sold after a fall. The trade-off runs the other way too: a mix cut too far, too early, gives up growth that a 25-year retirement may need.
How does rebalancing keep an allocation on track?
Rebalancing trims whichever asset has outgrown its target and adds to the one that has fallen behind, returning the portfolio to the weights you set. Without it, a portfolio drifts toward whatever has risen most, usually stocks. In a Vanguard study of a 60% stock, 40% bond portfolio from 1926 to 2009, the never-rebalanced version drifted to an average of more than 84% in stocks; it earned 9.1% a year against 8.5% for monthly rebalancing, but with a standard deviation of 14.4% against 12.1%. The extra return came from carrying more risk than its owner had chosen.
The schedule made little difference in that study. Annual rebalancing returned 8.6% with 11.9% volatility, close to the monthly result, with far fewer trades. Its authors concluded that checking once or twice a year and rebalancing when the mix is about 5 points off target balances risk control and cost for most stock and bond portfolios, with annual checks preferred where taxes or trading costs bite. The SEC's guide lists three ways to do it: sell the overweight asset and buy the underweight one, buy only the underweight asset with new money, or redirect regular contributions until the mix is back.
Worked example: Rebalancing a 60/40 portfolio after a strong year
Start with $60,000 in stocks and $40,000 in bonds. After a year in which stocks gain 30% and bonds 2%, you hold $78,000 in stocks and $40,800 in bonds, $118,800 in all. Stocks are now 65.7% of the portfolio, past a 5-point band.
- Sell and buy: move $6,720 from stocks to bonds, leaving $71,280 in stocks and $47,520 in bonds, back to 60/40.
- Redirect contributions: send all new money to bonds. It takes $11,200 of new bond purchases to restore 60/40, about 22 months at $500 a month if prices stood still.
Inside an IRA or 401(k), the trade triggers no tax bill. In a taxable account, selling $6,720 of stock that has risen can realize a taxable gain, which is a reason to consider the contribution route, or to make the trade inside a retirement account, first.
A target-date fund does this for you and also shifts the target as you age, and automatic rebalancing is much of what a robo-advisor charges for. 401(k) basics covers how workplace contributions and investment choices work.
What are the risks of setting your mix by age?
The main risks are treating a rule as personal advice, holding too much stock for money you will need soon, and holding too little for a long retirement.
- Sequence risk. A large stock share in the five years either side of retirement exposes the biggest balance to the worst timing, as the 2008-style example shows.
- Longevity and inflation. A mix cut to mostly bonds at 65 may not keep up with prices over 25 or 30 years; the guide to real returns and inflation works out what is left after rising prices.
- False precision. A rule gives an exact number for an approximate decision. Sticking with a sensible mix through a downturn matters more than whether it is 55% or 60% stocks.
- A partial picture. Setting the mix on one account while ignoring a spouse's savings, a pension or cash elsewhere can leave the household far more or less aggressive than intended.
- Drift. Years without rebalancing can leave a 60/40 plan holding far more stock than intended, as in the Vanguard study above.
- Bonds are not riskless. Bond prices fall when interest rates rise, and long-term bonds fall the most. Types of investment risk covers interest-rate, credit and inflation risk.
A rule of thumb, a glide path and a hand-built mix are all ways to answer the same question, and none of them removes market risk. The stocks hub covers the accounts and funds that hold whichever mix you choose.