"110 minus your age equals your stock percentage." It was the rule of thumb for decades. At 40, 70% stocks. At 60, 50%. Simple, memorable, easy to apply. It's also wrong for most modern investors — not by a small margin, but by 20-30 percentage points too conservative.
The old rule was calibrated for an era of 8% bond yields and 30-year life expectancies. Today's 4% bond yields and 85-year life expectancies change the math fundamentally. Modern research suggests 90-110 minus age is the better framework, with meaningful override conditions.
The Traditional Rule's Assumptions
"100 minus age" (and its cousin "110 minus age") assumes:
- Retirement at 65, 15-20 year retirement
- Bond yields high enough to support withdrawals
- Stock risk needs aggressive mitigation near retirement
All three assumptions are shakier today:
- Many retire at 55-60; 30-40 year retirements common
- Bond yields have been suppressed for 15 years
- Longer horizons mean stocks don't need as much mitigation
The Modern Recommendations
Current academic and practitioner consensus:
- Age 20-30: 90-100% stocks
- Age 30-40: 85-95% stocks
- Age 40-50: 80-90% stocks
- Age 50-60: 70-80% stocks
- Age 60-65: 60-70% stocks (into retirement)
- Age 65+: 50-70% stocks (depending on income needs and longevity expectations)
Compared to "100 minus age," these are 20-30% more equity at each age.
The Longevity Argument
A 65-year-old today has median remaining life expectancy of 20 years. A healthy 65-year-old might live 30+ more years. If your portfolio needs to last 30 years, you can't afford to be too conservative.
Heavy bond allocations provide stability but surrender the growth needed for 30-year horizons. 30 years of 4% bond yields barely keeps pace with inflation. 30 years of 7% real stock returns produces transformative wealth.
The Income Floor Adjustment
If you have pensions or Social Security covering 60%+ of retirement spending, you can take more equity risk in the portfolio (the income floor absorbs market shocks). If portfolio must cover most of spending, be more conservative.
Example: retiree with $60K Social Security + $40K pension = $100K guaranteed income covers $90K/year spending. Portfolio income is gravy. Allocate 80-90% stocks even at 65.
Different retiree with only $20K Social Security, $80K/year spending needs. Portfolio must generate $60K/year. Allocate 50-60% stocks for stability.
The Behavioral Override
The "right" allocation from a math perspective is whatever you can hold through drawdowns. If 80% stocks would panic-sell you in a bear market, 60% stocks you can hold is mathematically better.
Know yourself. If you haven't held equities through a 30%+ drawdown before, reduce your planned allocation by 10-15%. Test your tolerance in good times before bad times make the choice for you.
The International Piece
Modern allocation also addresses international exposure. Standard recommendations:
- 0-20% international: Buffett-style US-only approach
- 20-40% international: Vanguard's recommendation (market-cap neutral is 40%)
- 40-50% international: active diversification tilt
Most investors should be at 20-30% international equity as a default. Balances US dominance with diversification.
The Simple Starting Point
If you can't obsess over the details, start here:
- Under 50: 80% stocks (65% US, 15% international) / 20% bonds
- 50-60: 70% stocks / 30% bonds (same internal breakdown)
- 60-65: 60% stocks / 40% bonds
- 65+: 50-60% stocks / 40-50% bonds
This is defensible across any specific research. Customize as you learn your risk tolerance and income needs.
The Rebalancing Override
Allocation drifts with market movements. After a bull market, stock allocation grows. After a bear, shrinks. Rebalancing restores targets.
Rebalance:
- Once per year on a set date
- Or when any asset class drifts 5%+ from target
- Via new contributions when possible (don't trigger taxes unnecessarily)
Annual rebalancing is usually enough. Quarterly is excessive and creates friction.
The Verdict
Use 90 or 110 minus age rather than 100. Adjust up or down based on income floor, risk tolerance, and time horizon. Include 20-40% international equity. Rebalance annually. This captures 90% of the benefit of sophisticated allocation strategies.