Asset allocation by age is a common way to think about how your investments might change over time. The general idea is simple: when retirement is far away, you may have more time to ride out market ups and downs. As retirement gets closer, protecting what you have saved may become more important.
But age is only one input. A 45-year-old professor with a pension and a 45-year-old founder with most of their wealth in a startup may need very different mixes. This article walks through how asset allocation may evolve across career stages, the rules of thumb people search for, and the factors that can matter more than your birthday.
What Is Asset Allocation?
Asset allocation is how your investments are spread across different types of assets, such as stocks, bonds, and cash.
Why the mix matters
Stocks have historically offered more growth potential with more short-term ups and downs.
Bonds may provide income and can be less volatile than stocks, though they carry their own risks, including interest rate risk.
Cash and cash equivalents may offer stability and access, with limited growth potential.
Your overall mix can have a larger effect on your portfolio's behavior than any single investment choice. Asset allocation does not guarantee a profit or protect against loss.
Common Rules of Thumb, and Their Limits
People often search for a simple formula. One widely cited rule of thumb suggests subtracting your age from a number such as 100 or 110 to estimate the percentage to hold in stocks.
Why rules of thumb can fall short
They ignore other income: A pension or other guaranteed income source may change how much risk a portfolio can reasonably carry.
They ignore goals: Someone planning to leave a full-time role at 55 has a different timeline than someone working into their 70s.
They ignore personal comfort with risk: Two people of the same age may react very differently to market declines.
Rules of thumb can be a conversation starter, not a plan.
How Asset Allocation May Shift Across Career Stages
The stages below are general illustrations, not recommendations.
Early career: Time on your side
Early in an academic or research career, retirement may be decades away. Some people in this stage hold a larger share of growth-oriented investments because they have time to recover from downturns. This is also a good time to set up automatic contributions and choose investments thoughtfully inside university retirement plans.
Mid career: Balancing growth and responsibilities
Mid career often brings competing goals: education savings, a home, and continued retirement saving. Some people begin adding more stability to their mix, while others keep a growth focus because retirement is still far away. Reviewing your allocation after major events, such as a move to a new institution or a significant raise, can help keep it aligned.
Pre-retirement: Watching sequence of returns risk
In the five to ten years before retirement, many people pay closer attention to sequence of returns risk. This is the risk that poor market returns early in retirement, while you are withdrawing money, can have a lasting effect on how long your savings last. Some people respond by building a cushion of more stable assets for the first years of withdrawals.
Retirement and new ventures: Still investing for the long term
Retirement can last decades. For many academics and innovators, it is a transition to new ventures such as consulting or writing. Because savings may need to last a long time and keep up with inflation, many retirees continue to hold some growth-oriented investments.
What About Target Date Funds?
Target date funds are a category of investment that automatically shifts its mix over time based on a chosen retirement year. They are commonly offered in university retirement plans.
Points to consider
Funds with the same target year can have very different mixes and approaches.
A target date fund is designed around one timeline and may not reflect your other accounts.
Holding a target date fund alongside other funds can change your overall allocation in ways you may not intend.
Factors That May Matter More Than Age
Pensions and other income: Including any university pension or Social Security.
Planned retirement timing: Including phased retirement or early departure.
Concentrated holdings: Such as startup equity or stock options.
Liquidity needs: Upcoming expenses like tuition or a sabbatical.
Risk tolerance: How you feel and act when markets decline.
How Summit Retirement Advisors Approaches Asset Allocation
Summit Retirement Advisors' Asset Management Overview lists asset allocation, risk analysis, 401(k) allocation, diversification, pensions and stock options, and real estate planning. These are coordinated with broader planning described on the Financial Planning Overview page, including comprehensive financial planning focused on integrated strategies that can adapt as your career progresses.
The firm is located at 310 Ferry Street, Lafayette, IN 47901, and works with "research-driven professionals, scientists, professors, founders, and university leaders" who want clarity without sacrificing their time. Its approach centers on listening first, translating complexity into clarity, collaborative refinement, protecting your time, and long-term planning.
Review Your Mix
If you have not reviewed your asset allocation since your last career change, now may be a good time. Book an appointment or call 765-447-1330. You can also sign up to receive the firm's newsletter on the contact page.
Frequently Asked Questions
What is a good asset allocation by age?
There is no single right answer. Age can be a starting point, but income sources, goals, retirement timing, and risk tolerance can matter just as much.
What is the 110 minus age rule?
It is a rule of thumb that suggests subtracting your age from 110 to estimate a percentage to hold in stocks. It is a simplification and does not account for your full situation.
Should I hold bonds in my 30s?
Some people do and some do not. It depends on your goals, timeline, other savings, and comfort with market swings.
How should my portfolio change as I approach retirement?
Many people review their mix in the years before retirement, paying attention to income needs and sequence of returns risk. Changes depend on your plan.
Are target date funds a good idea?
They can be a convenient option for some people, but funds vary, and they may not reflect your other accounts or goals. Review how they fit your overall portfolio.
Securities offered through Regulus Financial Group, LLC, Member FINRA/SIPC. Advisory services offered through Regal Investment Advisors, LLC, an SEC Registered Investment Advisor. Regal Investment Advisors and Regulus Financial Group are affiliated subsidiaries of Regal Holdings of America, LLC. Insurance products are offered through Summit Financial Group of Indiana. Summit Retirement Advisors and Summit Financial Group of Indiana are affiliated but independent of the Regal entities. This article is for general educational and informational purposes only and is not tax, legal, or investment advice, nor a solicitation to buy or sell any security. Information is from sources believed to be accurate but is not guaranteed. Investing involves risk, including the possible loss of principal. Diversification and asset allocation do not guarantee a profit or protect against loss. Past performance is no guarantee of future results. Please consult with a qualified professional regarding your individual situation.
