There’s a school of thought on Wall Street that retirees should follow the so-called 100-minus-your-age rule when building a properly balanced post-career investment portfolio.
Also known as the rule of 100, the 100-minus-your-age long-term savings rule is designed to guard against investment risk in retirement. For example, if you’re 60, that means you should have only 40% of your retirement portfolio in stocks, with the rest in bonds, money market accounts and cash.
But is the rule of 100 still applicable in an era when today’s retirees don’t come from the same cookie-cutter generation as their parents and grandparents? Older generations had company pensions, rarely worked in retirement and didn’t live as long as recent retirees.
Today’s retirees are more likely to have part-time jobs, own income-producing annuities and stand a good chance of living into their 90s, thanks to modern disease prevention models and better access to health care.
With generational shifts redefining retirement life, things aren’t so simple, including the rule of 100. Here’s a closer look at the rule and how it should be applied — if at all.
[READ: How to Build a Balanced Retirement Portfolio]
What Is the Rule of 100?
The 100-minus-your-age rule establishes two key numbers — 100 and your current age — and sets it as a benchmark for assessing and balancing portfolio risk in retirement.
To follow the 100-minus-your-age rule, retirees deduct their current age from 100 to achieve an optimal balance of stocks and bonds in their retirement portfolio. That means a 65-year-old retiree should have no more than 35% of their retirement portfolio invested in stocks, with the rest invested in more conservative investments such as bonds, money market funds and cash.
Pros and Cons of the Rule of 100
On the upside, the 100-minus-your-age rule addresses a critical goal for retirees, taking a long-term view of investing, which is necessary when so many retirees are expected to live 30 years or more in retirement.
On the downside, the rule steers more retirees toward bonds and other capital preservation assets as they age, which doesn’t account for longer lifespans in retirement.
The rule of 100 follows a time-honored concept that, as you age, you should own more bonds. Some investment advisors take issue with that.
“I don’t agree with this formula for a couple of reasons,” says Derek Mazzarella, a certified financial planner at Gateway Financial Partners in Glastonbury, Connecticut. “First, if you’re younger, you’re typically going to be more conservative than you should be. Ultimately, when you have time on your side, stocks will generally outperform bonds over the long haul.”
While retirees should invest more conservatively as they age, that doesn’t mean owning more bonds at 80 than 60, Mazzarella notes. “Generally, the most dangerous period from a market-risk perspective is the five years before and after retirement,” he adds.
[Read: Retirement Challenges in 2025: Market Volatility, Inflation and Social Security]
Reassessing Risk
The risk argument for the rule of 100 formula stems from the belief that bonds typically perform better in a down market. “While that’s true from time to time, there are instances where stocks and bonds have negative returns in the same year, which happened in 2022,” Mazzarella says.
The formula may not make sense for retirees with competing risks in retirement. “Market risk says you should be conservative, but inflation says you should be aggressive,” Mazzarella adds. “The 100 formula does not account properly for these competing risks.”
Working With Your Time Horizon
When applying the 100-minus-your-age rule in real life, sometimes the results may be imbalanced.
“Let’s say a 60-year-old couple has $3 million saved, and they are retiring this year,” says Doug Carey, a CFA at WealthTrace in Zionsville, Indiana. “They have combined pensions and Social Security benefits of $125,000 annually. Their annual expenses are $75,000. This couple can clearly cover their expenses with yearly income, which means they’ll never touch their principal.”
That untouched cash in stocks will experience market gyrations during the 20 to 30 years it’s invested. “Time horizon is key when determining how much to put into stocks versus bonds, and in this case, their time horizon for their principal is very long,” Carey notes. “This couple should be 60% to 70% in stocks rather than the 40% that is implied by the 100-minus-your-age rule because stocks will most certainly outperform bonds over the time horizon they have before the principal is ever touched.”
Moreover, the retired couple in this scenario could have that money to leave to their heirs, who also might not touch most of the principal for a long time.
Retirement Planning Is More Complicated Today
Nobody knows the rule’s origins, but it became gospel in wealth management circles until recently, when some financial planners began speaking out against it.
“The rule of 100 formula is an oversimplification,” says Melissa Bouchillon, managing partner at Sound View Wealth Advisors in Savannah, Georgia. “It only considers one factor: getting more conservative as you age because you have a shorter time horizon and may need the funds.”
Bouchillon says there’s much more to consider when making asset allocation decisions for retirees.
“Retirees need to consider their asset level, their income needs from the portfolio, their risk tolerance and how that aligns with their goals,” she says. “For instance, if a retiree has a pension or income during retirement that meets their spending needs, they don’t necessarily need to move to a more conservative allocation as they age.”
Additionally, if a client is spending off their portfolio in retirement, those withdrawals need to be considered in the asset allocation decision, Bouchillon adds. “The decision needs to consider multiple factors, not just age,” she says.
[READ: What Net Worth Do You Need to Retire?]
Diversify Your Portfolio
While retirees should include conservative sectors of the stock market in a post-retirement investment portfolio, it’s just one part of a larger strategy.
“It’s more prudent for individuals to take the time to determine a big-picture allocation between equities, fixed income, alternatives and cash that allows them to meet their short- and long-term goals,” Bouchillon says. “The key to managing market risk effectively is to have layers of diversification within your equities, bonds, alternatives and cash investments.”
For example, your equities should be diversified by geography, sector and company size. “Over time, this is a better way to manage risk within the portfolio than overweighting one sector considered conservative,” she notes.
Bouchillon says other metrics might work better than the 100-minus-your-age rule for retirees. “Focus on creating an individualized plan that considers your retirement assets, debt, income needs and feelings about risk,” she says. “There is no one-size-fits-all approach, and this is a critical decision that retirees need to take the time to consider.”
Pivot to a Bucket Strategy
Mazzarella recommends implementing a bucket strategy instead of the 100-minus-your-age rule. “A bucket strategy puts your investments into three risk buckets based on how much money you’ll need in retirement,” he explains.
— Short-term bucket. This includes cash and very low-risk assets such as certificates of deposit containing two years’ worth of expenses.
— Mid-term bucket. This holds income and moderate-growth investments such as defensive stocks, dividend-paying stocks, and bonds, representing years three to six years of expenses.
— Long-term bucket. This is primarily for growth assets such as stocks to cover expenses beyond seven years.
The bucket strategy helps you mitigate market risks using the short-term bucket, while the growth bucket helps to combat inflation and plan for longevity. “Each year, depending on the market, you move money from the mid- and long-term bucket into the lower-risk bucket based on your income needs,” Mazzarella notes.
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Should Retirees Follow the 100-Minus-Your-Age Rule for Stock Allocation? originally appeared on usnews.com
Update 03/04/25: This story was published at an earlier date and has been updated with new information.
