How Much Risk Should You Actually Take With Your Age?

The classic version: subtract your age from 100, and that's the percentage to hold in stocks. At 30, 70% stocks. At 60, 40%.

The underlying logic is sound. A younger investor has decades to recover from a downturn; someone near retirement doesn't, and a bad year at the wrong moment does lasting damage.

Why it got revised

You'll now see 110 or 120 minus your age more often than 100. Kiplinger notes the main criticism of the original: it's arguably outdated, given longer life expectancies and people working past traditional retirement age. A longer retirement means a longer investing horizon, which supports more equity exposure than the old rule allowed.

The same logic drives target-date funds, which follow a predetermined glide path shifting from stocks toward bonds as a target year approaches. They're effectively the rule, automated — and their glide paths generally sit above what 100-minus-age would produce.

What the rule ignores

This is the useful part. justETF's summary of the criticisms is a good list, and each item is worth checking against your own situation:

Your actual risk tolerance. Some sixty-year-olds are comfortable with volatility; some thirty-year-olds lose sleep. Age doesn't tell you which you are.

Your other resources. A guaranteed pension, property, or a business changes how much risk your portfolio can carry.

Your income stability. Someone with unpredictable freelance income sits differently from someone tenured.

And it says nothing about which goal the money is for — a house deposit in four years shouldn't follow the same allocation as retirement in thirty, regardless of your age.

A better framing

The SEC's approach is more useful than any formula: allocation is a personal decision driven by your time horizon and your risk tolerance, and it changes at different points in your life.

So use the rule as a starting reference, then adjust deliberately for the things it can't see. And be honest in the adjustment — the test isn't how much risk you'd like to take, it's how much you'd hold through a bad year without selling.

One practical note: whatever mix you choose drifts as markets move, so periodic rebalancing is part of the system rather than an optional extra.

References

• The Easiest Asset Allocation Rule (100 Minus Your Age) — Kiplinger
• Should you follow the '100 minus your age' rule? — justETF
• Asset Allocation and Diversification — U.S. Securities and Exchange Commission — Investor.gov

This article is for general education only and is not investment advice. Age-based allocation rules are widely cited heuristics, not professional recommendations, and no allocation is suitable for everyone. Consult a qualified, licensed professional in your jurisdiction.