Asset allocation by age: how time horizon should shape the equity-bond mix

The 100-minus-age rule says that an investor's equity allocation should be 100 minus their age in years—so a 30-year-old holds 70% equity and a 70-year-old holds 30%. It is one of the most widely repeated heuristics in personal finance, and one of the more questionable now that life expectancies have lengthened and bond yields have spent the better part of a decade near zero.

What allocation by age means

Asset allocation by age is the practice of varying the equity-bond mix according to the investor's distance from a major capital event—usually retirement. The intuition is straightforward: an investor with thirty years of working income ahead can absorb a deep equity drawdown because there is time for the market to recover. An investor in their seventies, drawing down a portfolio to fund consumption, has less capacity to wait. Higher equity allocations earlier; lower equity allocations later.

Variations of the rule include 100 minus age (the original), 110 minus age (which adds 10 percentage points to the equity allocation across the lifecycle), and 120 minus age (a more aggressive variant). Target-date funds—which now dominate many retirement-savings markets—implement a similar logic via a programmed glide path that automatically reduces equity over time.

How the heuristic works

The equity-allocation curve over a lifetime is the glide path. A typical glide path starts at 80–90% equity in the investor's twenties and thirties, holds approximately that level through their forties, then declines linearly to 30–50% equity at the target retirement date. Some funds continue to de-risk after retirement; others—the to-retirement design—stop de-risking at the target date.

The mathematics behind the glide path follows from lifecycle theory: an investor's total wealth is the sum of human capital (the present value of future earnings, which behaves bond-like) and financial capital. Early in a career, human capital dominates the balance sheet; the financial portion can therefore be tilted heavily toward equities without the total balance sheet becoming dangerously equity-concentrated. As human capital depletes through ageing, the financial portion must compensate by shifting toward fixed income to maintain total balance.

What the evidence shows

Bengen (1994) established the original 4% safe withdrawal rule using a 50/50 equity-bond split and 30-year retirement horizons; subsequent work by Pfau and others has tested how the rule survives different glide paths, longer horizons, and lower bond-yield environments. The conclusion across this literature is that mechanical age-based rules survive most scenarios but fail at the tails—particularly in low-yield regimes, where retirees who follow a rule that mandates a high bond allocation may find their portfolios cannot support the assumed withdrawal rate over a 30-year retirement.

Empirically, the deepest equity drawdowns in modern data—1929–1932, 2000–2002, 2007–2009—took 4 to 15 years for a buy-and-hold investor to recover in real terms. A 65-year-old retiring at the start of any of these episodes and following a strict glide path would have faced a meaningful sequence-of-returns risk: the early drawdown depleted principal that could not then participate in the recovery. The standard rule is calibrated for the average case, and the dispersion around the average is wide.

The evidence also points to substantial heterogeneity in what is appropriate. Wealth, expected longevity, social-security or state-pension income, bequest motives, and individual risk tolerance all shift the optimal allocation away from any single rule. A retiree with a defined-benefit pension that covers essential expenses can run a more aggressive glide path than one whose entire retirement income depends on portfolio withdrawals.

Limitations and trade-offs

The 100-minus-age rule is a heuristic, not an optimisation. It ignores the level of bond yields—a 30% bond allocation at a 5% yield is a different position from a 30% bond allocation at a 1% yield, even though the rule treats them identically. It ignores wealth: a retiree with 50× their annual spending in liquid assets has a different problem from one with 15×. It ignores guaranteed income: a state pension covering essential expenses changes the allocation problem fundamentally.

The rule also assumes that age is the right proxy for horizon. For an investor managing wealth they will not consume themselves—a multi-generational family balance sheet, for example—the relevant horizon is much longer than the investor's life expectancy, and an age-based rule will produce an allocation that is meaningfully too conservative.

The most defensible version of the rule is as a starting point, not a destination. The investor's specific circumstances, goals, and constraints should pull the allocation away from the heuristic in whichever direction they imply.

Asset allocation by age in pfolio

pfolio's lower-volatility portfolio configurations are appropriate for shorter horizons than a 100% equity allocation would be—the realised drawdown profile is materially smaller. Investors approaching or in retirement can compare the historical drawdown and recovery characteristics of different portfolio configurations against their own horizon directly in pfolio Insights, and the construction methodology that drives the volatility profile is documented at how we build portfolios.

Related articles

• Asset allocation explained: how to divide a portfolio across asset classes
• Investment horizon: how time in the market affects risk, return, and strategy choice
• Risk tolerance explained: capacity, willingness, and time horizon
• Sequence of returns risk: why the order of returns matters as much as the average
• Goal-based investing: building portfolios around the investor's defined objectives