Asset Allocation by Age 2026: The Rule of 110 and Smarter Variants
By the 3Tej Research Desk · Published May 23, 2026 · 3 min read
- Rule of 110: stocks = 110 minus age (40yo: 70% stocks, 30% bonds)
- Rule of 100: more conservative (40yo: 60% stocks); rule of 120 more aggressive
- Add international: 20 to 40% of equity exposure across all rules
- Standard advice: equity weight DECLINES with age. Bond tent reverses post-retirement (see Pfau/Kitces)
- These rules are starting points; risk tolerance, time horizon, and other income override
Asset allocation is the single biggest determinant of long-run portfolio outcomes, dwarfing fund selection. The simplest rules of thumb (rule of 100, 110, 120) give you a starting point as a function of your age. They're not optimized for everyone, but they prevent the two biggest mistakes most retail investors make: too aggressive early (overconfidence in a bull market) and too conservative late (giving up real returns in retirement).
The rules of thumb
| Rule | Stock % at 25 | Stock % at 45 | Stock % at 65 | Stock % at 80 |
|---|---|---|---|---|
| Rule of 100 | 75% | 55% | 35% | 20% |
| Rule of 110 | 85% | 65% | 45% | 30% |
| Rule of 120 | 95% | 75% | 55% | 40% |
Most modern advice uses 110 or 120, reflecting longer life expectancy (need more growth in retirement) and the reality that high-quality bonds yield less than they used to.
Beyond the basic rule
- Add international. 20 to 40% of your equity slice in international (developed + emerging) reduces single-country risk. Vanguard suggests 30 to 40% of equity in non-US for US investors.
- Adjust for other income. Government pension, Social Security expected, rental property income all act like 'bonds' (steady, low risk). If 30% of your retirement income is from these, you can be more aggressive with the investment portfolio.
- Risk tolerance matters. The 'right' allocation is the one you can stick with through a 30% drawdown. Aggressive portfolios that you abandon at the bottom underperform conservative portfolios you keep.
- Real estate inclusion. Owning a home isn't quite an investable asset but it does diversify net worth. Some planners count primary residence equity as part of the bond allocation (steady, low-volatility).
Bond tent: smarter post-retirement glide
Pfau and Kitces (2014) showed that REVERSING the post-retirement glide path improves portfolio survival:
- 5 years pre-retirement, REDUCE equity (e.g., 60% to 45%)
- Hold low through year 1 of retirement (most vulnerable to sequence risk)
- GRADUALLY INCREASE equity through years 5 to 15 of retirement (back to 65-75%)
- Hold high in late retirement (more aggressive, since survivors need growth for inflation)
Counterintuitive but the math wins. See the separate bond-tent-retirement-glide-path-2026 blog post for the full Pfau/Kitces walk-through.
Common mistakes
- Too conservative too early. A 25yo in 50/50 stocks/bonds gives up 30+ years of stock returns for a benefit (low volatility) they don't need for that long. Stay aggressive while horizon is long.
- Too aggressive too late. A 65yo in 90/10 stocks/bonds faces sequence-of-returns risk that can permanently impair the portfolio if the market drops in the first 2 to 3 years of retirement.
- Confusing risk tolerance with risk capacity. Risk capacity is how much risk you SHOULD take based on time horizon and other income. Risk tolerance is how much you CAN psychologically tolerate. Pick the lower of the two.
- Ignoring rebalancing. An 80/20 portfolio left unchecked through a bull market becomes 90/10 and you're more aggressive than you intended. Rebalance annually or when allocation drifts 5+ percentage points.
Frequently asked questions
What is the rule of 110 for asset allocation?
Hold (110 minus your age) percent of your portfolio in stocks, the rest in bonds. A 40-year-old: 70% stocks, 30% bonds. The rule of 100 is more conservative (60/40 at age 40); 120 is more aggressive (80/20). All are starting points, not optimization.
Should I include my home in asset allocation?
No, for portfolio purposes. Your home is illiquid; you can't rebalance from it during a downturn. Some planners count home equity as a 'bond' allocation for total-net-worth balance sheets, but the investable portfolio (401k, IRA, brokerage, etc.) is allocated independently.
How often should I rebalance?
Annually is the standard recommendation. Or use a 5% band: only rebalance when any allocation drifts more than 5 percentage points from target. Both produce similar long-term outcomes; annual is simpler to remember.
What is the right allocation in retirement?
Depends on your withdrawal rate. At a 4% safe withdrawal rate for a 30-year retirement, 50 to 60% equity is the historical sweet spot. Earlier retirement (longer horizon) needs more equity (60 to 70%). Heavily-funded retirees with low withdrawal rate can be more conservative.
Does adding international stocks help?
Yes, modestly. Vanguard's research shows international exposure reduces single-country (US) risk without sacrificing long-run return. 20 to 40% of your equity slice in international is the typical target.
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Sources and methodology
Numbers on this page are sourced from official government / regulator websites and refreshed automatically every Sunday by our build pipeline. Hover any number with a dotted underline to see its source and as-of date.
Tax authorities cited (8 jurisdictions)
Methodology: each calculator linked from this post documents its formula. Live market data (FX, treasury yields, mortgage rates) is pulled from public APIs (exchangerate.host, FRED, BoE, ECB, BoC, CoinGecko, stooq).