There’s a longstanding guideline that retirees should follow the so-called “100-minus-your-age” rule, which suggests how retirees should balance their investment portfolios.
Also known as the rule of 100, the 100-minus-your-age rule was 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 today’s retirees look very different from earlier generations. People are living longer, often working part time, and relying less on traditional pensions.
As a result, many are taking a more active role in managing their investments. A T. Rowe Price study, for instance, found that from 2019 and 2024, only 26% of older investors left their stock allocations unchanged, compared with 46% of younger investors.
Still, investment decisions are highly personal. While the rule of 100 can be a useful starting point, it’s worth examining when — and whether — the rule should be applied in today’s retirement landscape.
[Read: How to Build a Balanced Retirement Portfolio]
What Is the Rule of 100?
The 100-minus-your-age rule uses two key numbers, 100 and your age, to create a benchmark for assessing and balancing portfolio risk in retirement.
To follow the 100-minus-your-age rule, retirees deduct their 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 in stocks, with the rest in more conservative investments such as bonds, money market funds and cash.
Pros and Cons of the Rule of 100
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.
But the rule steers retirees toward bonds and other capital preservation assets as they age, which doesn’t account for longer lifespans in retirement.
“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 they should own more bonds at 80 than 60, Mazzarella says. “Generally, the most dangerous period from a market-risk perspective is the five years before and after retirement,” he adds.
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,” 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, 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 chartered financial analyst and president of 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
The exact origins of the 100-minus-your-age rule are unclear, but it became a widely used rule of thumb in wealth management. In recent years, however, some financial planners have pushed back on its simplicity.
“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.
“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 from 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, the stock portion of your portfolio 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 says.
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Should Retirees Follow the 100-Minus-Your-Age Rule for Stock Allocation? originally appeared on usnews.com
Update 04/15/26: This story was published at an earlier date and has been updated with new information.
