At the end of 2025, 61% of participants in Vanguard-administered retirement plans had their entire account in a single target-date fund, according to Vanguard’s How America Saves 2026 report. That is a lot of people handing their stock-and-bond mix to a formula based mostly on one number: the year they expect to retire.
For many of them, that is a reasonable choice. Age is a useful starting point for deciding how much risk to take, because time horizon shapes how well you can ride out a market decline. But age is not the whole story, and the popular rules of thumb hide assumptions worth understanding before you rely on one.
Key takeaways
- Age-based formulas such as “110 minus your age in stocks” are starting points, not prescriptions; they differ from each other by 10 to 20 percentage points.
- Your time horizon, job stability, other income and reaction to losses can matter as much as your birth year.
- The best allocation is one you can hold through a bad market without selling.
The classic formulas
Asset allocation means how you divide money among major categories, mainly stocks, bonds and cash. The SEC’s Investor.gov guide explains why this split drives most of a portfolio’s risk and return. Three age-based shortcuts come up most often:
| Rule | Stocks at 30 | Stocks at 50 | Stocks at 65 |
|---|---|---|---|
| 100 minus your age | 70% | 50% | 35% |
| 110 minus your age | 80% | 60% | 45% |
| 120 minus your age | 90% | 70% | 55% |
The rest goes to bonds and cash. The original “100 minus age” rule dates from a time when people retired with pensions and lived shorter retirements. As life expectancy rose and bond yields fell for much of the past few decades, many planners shifted toward 110 or 120 to keep more growth in the portfolio for a retirement that might last 30 years.
How target-date funds handle it
A target-date fund applies a similar idea automatically. Its “glide path” starts heavy in stocks for young investors, often around 90%, and moves toward bonds as the target year approaches. Glide paths vary by fund company. Some keep reducing stock exposure for years after the target date; others reach their most conservative mix at retirement and hold it there. Two funds labeled “2050” from different providers can hold meaningfully different amounts of stock, so it is worth checking the fund’s fact sheet. The SEC’s glossary entry on target-date funds flags this as a point to review.
The appeal is that the fund also rebalances for you. When stocks surge and become a larger share than intended, the fund trims them back. If you build your own mix, that job is yours; see our guide to rebalancing your portfolio.
Where age-based rules fall short
They ignore when you actually need the money
A 60-year-old who plans to work until 70 and will not touch most of her savings until her late 70s has a much longer horizon than the formula assumes. A 40-year-old saving for a house down payment in three years should not be 70% in stocks with that money, whatever his age suggests. Time horizon belongs to the goal, not the person.
They ignore other income
Someone who will receive a pension that covers most essential expenses can afford more stock risk than someone relying entirely on savings. Social Security works similarly: a steady, inflation-adjusted income stream acts a bit like a bond holding, which some planners count when setting the rest of the mix.
They ignore your job
A tenured teacher with a predictable salary is in a different position from a commission-based salesperson whose income falls when the economy weakens, the same time stocks tend to fall. The more your paycheck moves with the market, the less market risk your portfolio may need.
They ignore how you behave
The rule says 80% stocks, but if a 30% drop would make you sell everything, the rule did not protect you. A more conservative mix you hold steady through a downturn can end up with better results than an aggressive one abandoned at the bottom. Our article on what to do when the market drops covers that risk.
What a stock-heavy mix means in a bad year
Percentages feel abstract until you put dollars on them. Say you have a hypothetical $200,000 portfolio and stocks fall 35%, roughly the scale of major bear markets such as 2008. At 90% stocks, the portfolio drops by about $63,000, assuming bonds hold steady. At 60% stocks, it drops by about $42,000. At 40% stocks, about $28,000. Bonds can also fall, as they did in 2022, so the real figures could be worse in some years. Picture the dollar amount, not the percentage, and ask whether you would keep investing through it.
Building your own mix
If you want something more tailored than a formula, this process works for most people:
- Start from a rule of thumb. Pick 110 or 120 minus your age as a first draft.
- Adjust for your horizon. Shift toward stocks if you plan to work longer or will not need the money for decades. Shift toward bonds and cash for money you need within about five years.
- Adjust for income stability. A pension or very secure job can justify more stocks; volatile income may call for fewer.
- Stress-test it. Multiply your stock percentage by your balance and by 35%. If that dollar loss would push you to sell, dial it back.
- Choose simple building blocks. Broad stock and bond index funds, or a single target-date fund whose glide path matches your plan.
- Write it down and rebalance. Note your target split and revisit it once a year, or after major life changes such as marriage, a new child, a job change or an inheritance.
Your allocation should change as you age, but not in a straight line set by a birthday. It should change as your horizon, income and tolerance for risk change, and a rule of thumb is simply a sensible place to begin.
