How Should Your Allocation Change with Age?

When it comes to investing, one of the most common questions we hear is: “Should I change my investment mix as I get older?”

A recent article by Nick Maggiulli from “Of Dollars and Data” explored this topic, and we wanted to share our perspective, building on some of his insights while highlighting how we approach the asset allocation process with our clients. (You can read Nick’s full article here.)

The Classic Rule: 100 Minus Your Age

A common rule of thumb says that by subtracting your age from 100 (or 110 is also sometimes used), you can determine the percentage of your portfolio that should be in stocks, in other words:

• If you’re 30, that means 70-80% stocks.
• If you’re 60, it’s closer to 40-50% stocks.

This is a helpful starting point, but like Nick points out, age alone doesn’t tell the whole story.

Life Is More Than Your Portfolio

The biggest flaw with these age-based strategies is they focus only on your investments—ignoring everything else happening in your financial life.

For example, someone in their 40s with a mortgage and children who is saving for upcoming college tuition may need a more conservative allocation than a new retiree with no debt and a fully funded retirement account. Or, a financially independent retiree investing primarily for future generations might actually want to increase equity exposure to maximize long-term growth, contrary to the “100 minus your age” rule.

The right allocation should reflect your whole financial picture—not just your birth year.

What to Focus on in Each Decade

In Your 20s:

Nick suggests that investors in their 20s take the opportunity at this stage to:

• Build good saving and investing habits.
• Use this time to learn how you react to market risk—the stakes are lower, so it’s a safe time to test your tolerance.
• Focus more on your career and income growth—your future earnings matter more than short-term investment returns right now.

When we work with clients in their 20s (often the second or third generation), the focus is on fundamentals. At this age, saving and budgeting should be central, setting up a lifetime of good saving and spending behaviors. This is also a time for investors to become educated—not just about investing and the market, but about themselves—how do they feel about risk, what are their long-term goals, what’s most important to them? Learning about and becoming comfortable with market volatility is important, particularly early on in one’s investing career, as there is plenty of time to weather market ups and downs.

In Your 30s:

Nick points out that in this stage, investors should be:

• Planning ahead for big life events—home purchases, weddings, or kids.
• Keeping money for near-term goals conservative (cash or short-term bonds).
• For retirement savings, leaning toward stocks, but with a clear focus on actual goals and timeframes.

One’s 30s are a good time to get a solid footing with your savings and investments. When we help clients in their 30s with their financial planning process, prioritization is key. Although you have a long time horizon to retirement, there are often large near-term expenditures that may limit how aggressive you can afford to be. This is a time when we work closely with our clients to define and develop timelines for each of their goals. The degree to which these goals will impact our recommended allocation depends on the extent to which these goals can be funded via income versus withdrawals from the portfolio.

Another important consideration at this stage of life is the relative importance of each of your financial goals. Once you’ve identified all your core financial goals, you can work with your advisor to determine the portion of your investments and annual savings that are needed to meet these goals with a high level of confidence. If your current portfolio and annual savings are putting you on track to exceed your core financial goals, you may be able to take a more aggressive posture with the excess funds.

In Your 40s & 50s:

Nick suggests scaling back on risk during this period:

• Expenses often peak—mortgages, tuition, healthcare—which means financial flexibility becomes more important.
• Make sure you have the right insurance, a bigger emergency fund, and a portfolio risk level that fits your responsibilities.
• If your career is going well, these can also be your highest-earning and highest-saving years.

When clients reach their 40s and 50s, they often find themselves in the “sandwich generation” —squeezed between children in college and the need to care for aging parents. The good news is that they often have higher income than at any other period of their lives, but we make sure clients understand that saving is more important than ever now. How much risk to take in your portfolio in this life stage is highly dependent on your financial planning goals. How much of a cushion have you built? What are your current financial responsibilities, and what do you expect in the near future? While we agree with Nick that reducing portfolio risk may be beneficial depending on your circumstances, this is a very individual decision.

In Your 60s and Beyond:

Nick’s recommendations for those beyond the age of 60 is focused on one’s individual situation:

• There’s no single right answer here. Your allocation should reflect your spending plan, legacy goals, and personal comfort with volatility.
• Remember, playing it too safe creates its own risk of not keeping up with inflation over a 30-year retirement.
• Your ideal allocation might look very different if you’re drawing down your portfolio to fund retirement versus investing for heirs.

We are in full agreement with this; asset allocation strategies can vary widely among our clients aged 60 and above based on their unique situations. We look closely at your retirement savings and spending needs, your estate plan, and your vision for your legacy when crafting an allocation strategy to fit your needs and objectives.

Putting It All Together

Age matters—but it’s just one piece of the puzzle. The right allocation comes from understanding your goals, your risk tolerance, your overall financial flexibility, your spending needs, and the purpose of each of your accounts.

That’s why we always start with your comprehensive financial plan—not just your age—when we recommend how to invest your portfolio.

If you’d like to revisit your current allocation—or if your life has changed recently—let’s talk. We’re here to make sure your investments keep up with your life and your goals.

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