Asset Allocation by Age: How Conservative Should Your Portfolio Be?
You’re 28 years old. Should your portfolio be 100% stocks? 80/20 stocks/bonds? 90/10?
The answer matters—a lot.
- Too aggressive (100% stocks) = You panic-sell during a crash and lock in losses
- Too conservative (50% bonds at age 30) = You miss decades of growth and retire with half the wealth
Asset allocation (how you split money between stocks, bonds, and other assets) is the single biggest factor determining your investment returns—more than which stocks you pick or when you buy.
Research shows: Asset allocation explains 90%+ of portfolio performance variance. Stock selection and market timing? Less than 10%.
This guide will show you:
- The optimal asset allocation by age
- How to customize for your risk tolerance
- Real portfolio examples for ages 20-70
- When to shift from aggressive to conservative
The Traditional Rule (Outdated)
Old rule: “Your bond allocation = your age”
Example:
- Age 30 → 30% bonds, 70% stocks
- Age 50 → 50% bonds, 50% stocks
- Age 70 → 70% bonds, 30% stocks
Why this rule is outdated:
- Created when people died at 70 (now living to 85-90)
- Assumed retirement at 65 (many work longer or pursue financial independence early)
- Too conservative for longer lifespans (bonds don’t grow wealth)
Updated rule: “Your bond allocation = your age minus 20”
Example:
- Age 30 → 10% bonds, 90% stocks
- Age 50 → 30% bonds, 70% stocks
- Age 70 → 50% bonds, 50% stocks
This is better—but still just a starting point.
Asset Allocation by Age (Detailed Guide)
Age 20-30: Maximum Aggression (90-100% Stocks)
Recommended allocation:
- 90-100% stocks
- 0-10% bonds
- 0-5% alternatives (REITs, gold, crypto if desired)
Why so aggressive:
- You have 35-45 years until retirement (time to recover from crashes)
- Stocks return ~10% annually long-term (bonds only 4-5%)
- You’re earning income (not withdrawing from portfolio)
- Small account balances = volatility doesn’t hurt as much
Example portfolio (25 years old, $25,000 invested):
- 70% US total stock market (VTI)
- 20% International stocks (VXUS)
- 10% Bonds (BND) OR keep 100% stocks
Expected annual return: 9-10% Expected volatility: High (could drop 40-50% in a crash, but you have time to recover)
Psychological readiness test:
If your $25,000 portfolio dropped to $12,500 in a crash, would you panic sell or buy more?
- Panic sell → Add 10-20% bonds
- Buy more → Stay 100% stocks
Age 30-40: Aggressive Growth (80-90% Stocks)
Recommended allocation:
- 80-90% stocks
- 10-20% bonds
- 0-5% alternatives
Why still aggressive:
- 25-35 years until retirement
- Peak earning years (higher income to invest)
- Compounding is accelerating
- Market crashes hurt but you can still recover
Example portfolio (35 years old, $150,000 invested):
- 50% US total stock market (VTI)
- 25% International stocks (VXUS)
- 10% Small-cap value (VBR)
- 15% Bonds (BND)
Expected annual return: 8-9% Expected volatility: Moderate-high (could drop 35-40% in crash)
Life events to consider:
- Buying a house (may need 5-10% cash/bonds for down payment)
- Starting a family (emergency fund more important)
- Career risk (job instability = slightly more bonds for safety)
Age 40-50: Balanced Growth (70-80% Stocks)
Recommended allocation:
- 70-80% stocks
- 20-30% bonds
- 0-5% alternatives
Why less aggressive:
- 15-25 years until retirement (less time to recover from crashes)
- Portfolio is larger (a 40% drop is devastating at $500K)
- May have kids’ college expenses
- Approaching peak net worth before retirement
Example portfolio (45 years old, $400,000 invested):
- 40% US total stock market (VTI)
- 20% International stocks (VXUS)
- 10% Dividend stocks (SCHD)
- 25% Bonds (BND)
- 5% REITs (VNQ)
Expected annual return: 7-8% Expected volatility: Moderate (could drop 30-35% in crash, but bonds cushion blow)
Life events to consider:
- College tuition (shift 10-20% to bonds/cash for upcoming expenses)
- Health issues (may need to retire early)
- Business ownership (business = risky asset, so balance with more bonds)
Age 50-60: Pre-Retirement (60-70% Stocks)
Recommended allocation:
- 60-70% stocks
- 30-40% bonds
- 0-5% alternatives
Why more conservative:
- 5-15 years until retirement
- Portfolio is large (crashes hurt badly)
- Less time to recover
- Sequence of returns risk (bad years right before retirement = devastating)
Example portfolio (55 years old, $750,000 invested):
- 35% US total stock market (VTI)
- 15% International stocks (VXUS)
- 15% Dividend stocks (SCHD)
- 35% Bonds (BND)
- 0% alternatives (simplify as you approach retirement)
Expected annual return: 6-7% Expected volatility: Moderate-low (could drop 25-30%, but bonds provide stability)
Critical decade:
- The 10 years before retirement are most important
- A 40% drop at age 58 can delay retirement by 5-10 years
- Prioritize stability over growth
Age 60-70: Early Retirement (50-60% Stocks)
Recommended allocation:
- 50-60% stocks
- 40-50% bonds
- 0% alternatives (keep it simple)
Why even more conservative:
- In retirement or approaching retirement
- Withdrawing from portfolio (can’t wait for recovery)
- Sequence of returns risk at peak
- Protecting decades of accumulated wealth
Example portfolio (65 years old, $1,000,000 invested):
- 30% US total stock market (VTI)
- 15% International stocks (VXUS)
- 10% Dividend stocks (SCHD)
- 45% Bonds (BND)
Expected annual return: 5-6% Expected volatility: Low (could drop 20-25%, bonds provide cushion)
Withdrawal strategy:
- 4% rule: Withdraw $40,000/year ($1M × 4%)
- Withdraw from bonds first (let stocks grow)
- Rebalance annually to maintain 55/45 allocation
Age 70+: Retirement (40-50% Stocks)
Recommended allocation:
- 40-50% stocks
- 50-60% bonds
- 0% alternatives
Why maintain stocks:
- You may live 20-30 more years (need growth)
- Social Security covers baseline expenses (portfolio can stay invested)
- Legacy planning (leaving money to heirs)
Example portfolio (75 years old, $900,000 invested):
- 25% US total stock market (VTI)
- 10% Dividend stocks (SCHD)
- 5% International stocks (VXUS)
- 60% Bonds (BND)
Expected annual return: 4-5% Expected volatility: Very low (could drop 15-20%, mostly protected by bonds)
Key insight: Don’t go 100% bonds. Inflation and longevity risk require some stock exposure.
Customizing for Your Situation
Factor 1: Risk Tolerance (How You Sleep at Night)
High risk tolerance:
- You’ve lived through crashes and didn’t panic sell
- You understand volatility is normal
- You have stable income and large emergency fund → Add 10-20% more stocks
Medium risk tolerance:
- You’re uncomfortable with 30%+ drops but can handle 20%
- You check your portfolio monthly (not daily)
- You have moderate job security → Stick with age-based allocation
Low risk tolerance:
- You panic when portfolio drops 10%
- You check portfolio daily and stress about it
- You have job instability or irregular income → Add 10-20% more bonds
The sleep-at-night test: If you can’t sleep worrying about your portfolio, you’re too aggressive.
Factor 2: Time Horizon
Retiring in 5 years: → Act like you’re 60 (even if you’re 45): 60% stocks, 40% bonds
Retiring in 30+ years: → Act like you’re 25 (even if you’re 40): 90% stocks, 10% bonds
Time horizon matters more than age.
Factor 3: Income Stability
Stable W-2 job with pension: → Pension = bond-like income, can be more aggressive with portfolio → Add 10-20% more stocks
Self-employed with variable income: → Your income is volatile, your portfolio shouldn’t be → Add 10-20% more bonds
Government job with pension: → Ultra-stable income + guaranteed retirement → Can be very aggressive (90-100% stocks even in your 50s)
Factor 4: Other Assets
You own a business (worth $500K): → Business = risky asset (illiquid, concentrated) → Portfolio should be more conservative to balance
You own rental properties: → Real estate = moderately risky asset → Add 10% more bonds to portfolio
You have a large emergency fund (12+ months): → Cash acts like bonds → Can be more aggressive with portfolio
Sample Portfolios by Age and Risk Profile
Conservative (Age 30)
- 70% Stocks (50% US, 20% International)
- 30% Bonds
Moderate (Age 30)
- 85% Stocks (60% US, 25% International)
- 15% Bonds
Aggressive (Age 30)
- 100% Stocks (70% US, 30% International)
Conservative (Age 50)
- 50% Stocks (35% US, 15% International)
- 50% Bonds
Moderate (Age 50)
- 65% Stocks (45% US, 20% International)
- 35% Bonds
Aggressive (Age 50)
- 80% Stocks (55% US, 25% International)
- 20% Bonds
Conservative (Age 65)
- 35% Stocks (25% US, 10% International)
- 65% Bonds
Moderate (Age 65)
- 50% Stocks (35% US, 15% International)
- 50% Bonds
Aggressive (Age 65)
- 65% Stocks (45% US, 20% International)
- 35% Bonds
When to Shift Your Allocation
Gradual vs Immediate Shift
Gradual (recommended):
- Shift 5-10% from stocks to bonds every 5-10 years
- Happens during annual rebalancing
- Less disruptive
Example:
- Age 30: 90/10 stocks/bonds
- Age 40: 80/20 stocks/bonds
- Age 50: 70/30 stocks/bonds
- Age 60: 55/45 stocks/bonds
Immediate (for life events):
- Job loss → Add 10-20% bonds immediately
- Major health issue → Add 20% bonds
- Retiring next year → Shift to target retirement allocation NOW
The Glide Path
What it is: Automatic shift from aggressive to conservative over time.
How it works:
- Age 25: 90% stocks
- Age 35: 85% stocks
- Age 45: 75% stocks
- Age 55: 65% stocks
- Age 65: 50% stocks
Easiest way: Use a target-date fund (e.g., Vanguard Target Retirement 2055)
- Auto-adjusts allocation as you age
- No manual rebalancing needed
Common Asset Allocation Mistakes
Mistake 1: Too Conservative Too Young
Problem: 30-year-old with 50% bonds (will miss decades of growth)
Fix: If you’re under 40, aim for 80-90% stocks
Mistake 2: Too Aggressive Too Late
Problem: 60-year-old with 95% stocks (one crash could destroy retirement)
Fix: If you’re within 10 years of retirement, max 70% stocks
Mistake 3: Never Adjusting
Problem: Set allocation at age 25, never changed it (now 55 and 100% stocks)
Fix: Review and adjust every 5-10 years
Mistake 4: Overreacting to Markets
Problem: Shifting to 100% bonds after a crash (locking in losses)
Fix: Stick to your allocation. Don’t make emotional changes.
Mistake 5: Ignoring Risk Tolerance
Problem: Following age-based allocation despite constant stress
Fix: If you can’t sleep, add more bonds (even if “suboptimal”)
Asset Allocation Quick Reference
| Age | Conservative | Moderate | Aggressive |
|---|---|---|---|
| 25 | 80/20 | 90/10 | 100/0 |
| 30 | 75/25 | 85/15 | 95/5 |
| 35 | 70/30 | 80/20 | 90/10 |
| 40 | 65/35 | 75/25 | 85/15 |
| 45 | 60/40 | 70/30 | 80/20 |
| 50 | 55/45 | 65/35 | 75/25 |
| 55 | 50/50 | 60/40 | 70/30 |
| 60 | 45/55 | 55/45 | 65/35 |
| 65 | 40/60 | 50/50 | 60/40 |
| 70 | 35/65 | 45/55 | 55/45 |
Your Asset Allocation Action Plan
This Week:
- Determine your current allocation (log into brokerage, calculate %)
- Choose your target allocation (use age + risk tolerance)
- Calculate gap (current vs target)
- Plan rebalancing (if needed)
This Month:
- Rebalance to target allocation
- Set up automatic contributions (if not already)
- Document your allocation plan (write it down)
- Set calendar reminder to review in 12 months
Every Year:
- Review allocation (December or January)
- Rebalance if drift >5%
- Consider if life situation changed (job, health, retirement timeline)
Every 5 Years:
- Reassess risk tolerance
- Adjust target allocation (shift 5-10% toward bonds as you age)
- Update investment policy statement
Related Articles
Optimizing your investment strategy? Check out these guides:
- Portfolio Rebalancing Guide - When and how to rebalance
- Advanced Investing Strategies - Move beyond basics
- Dividend Investing Strategy - Build passive income
- Investing $100/Month - Start building wealth
The Bottom Line
Asset allocation by age (moderate risk tolerance):
- Age 20-30: 90% stocks, 10% bonds
- Age 30-40: 80% stocks, 20% bonds
- Age 40-50: 70% stocks, 30% bonds
- Age 50-60: 60% stocks, 40% bonds
- Age 60-70: 50% stocks, 50% bonds
- Age 70+: 45% stocks, 55% bonds
Customize based on:
- Risk tolerance (high = add 10-20% stocks, low = add 10-20% bonds)
- Time horizon (retiring soon = more conservative)
- Income stability (volatile income = more bonds)
- Other assets (own business/real estate = more bonds in portfolio)
Key principle: As you age, gradually shift from stocks (growth) to bonds (stability).
Action plan:
- Calculate your current allocation (today)
- Choose target based on age + risk tolerance (today)
- Rebalance if >5% off target (this week)
- Review annually, adjust every 5-10 years
Don’t obsess over perfect allocation. Being “roughly right” (70/30 vs 75/25) matters way more than being “precisely wrong” (90/10 when you can’t handle volatility).
Set your allocation. Stick to it. Rebalance once per year. Move on with your life.
