Equity Strategy · 5 min read · 2026-01-27
The 9-variable allocation by age framework.
Age is one input. Eight more determine the right allocation across decades.
Two 60-year-olds with the same age can have 40-percentage-point allocation differences.
The '100 minus age' rule (or 110 minus age, or 120 minus age) is a starting heuristic. The right answer for any household depends on guaranteed income, debt obligations, risk tolerance, and horizon. Equally-aged households can have substantially different optimal allocations.
The nine indicators
The nine variables of allocation.
Each modifies the age-based starting point. The composite produces the household-specific equity-bond allocation.
Age and remaining horizon
Pattern: longer horizon = more equity
Longer horizons can absorb more equity volatility. The base age rule captures this.
Guaranteed income (Social Security, pension)
Pattern: more = more equity
Households with substantial guaranteed income can take more risk on the portfolio. Pension and SS effectively act as bond-equivalents.
Human capital remaining
Pattern: working = bond-like income stream
Working-age earners have human capital that acts as a bond-equivalent. More years of work supports more portfolio equity.
Risk tolerance
Pattern: behavioral resilience
Self-knowledge of behavioral resilience matters. A 90% equity allocation requires the holder to stay invested through 50% drawdowns.
Debt obligations
Pattern: high debt = more bonds
Households with significant debt face cash-flow pressure that argues for more bond stability.
Spending need flexibility
Pattern: flexible vs fixed
Households whose spending can flex with income can take more risk. Fixed-spending retirees need more bond stability.
Tax-rate trajectory
Pattern: bracket changes
Anticipated tax-rate changes affect after-tax allocation. Roth-heavy holders can take more equity risk because the tax is paid.
Inflation exposure
Pattern: real spending need
Long horizons amplify inflation impact. Longer horizons argue for more equity (which historically beats inflation) and TIPS exposure.
Bequest priority
Pattern: high bequest = longer effective horizon
Households with strong bequest priorities have effective horizons extending into next generation. More equity may be appropriate.
Why age alone is insufficient
The '100 minus age' rule produces a 60% equity allocation for a 40-year-old and a 30% allocation for a 70-year-old. The rule is a useful starting point but ignores meaningful variation in household circumstance. A 40-year-old with no emergency fund, high debt, and dependents needs less equity than a 40-year-old with strong cash flow and no liabilities.
Similarly, a 70-year-old retiree with substantial Social Security and pension covering essential spending can hold more equity than a 70-year-old retiring on a portfolio-only income stream. The age rule misses both.
Human capital as a bond
Working-age earners have human capital — the present value of future labor income. Stable employment in a recession-resistant career produces a bond-like income stream. The implication is that working-age portfolios can hold more equity because the household's overall balance sheet (portfolio plus human capital) is already 'bond-heavy' via the human capital.
As the worker approaches retirement, human capital declines and the portfolio must become more conservative to compensate. The traditional age-based glide path captures this implicitly. The framework makes it explicit and customized.
Guaranteed income changes everything in retirement
Retirees with high guaranteed income (Social Security plus pension covering 70%+ of essential spending) face fundamentally different allocation decisions than retirees relying entirely on portfolio withdrawals. The guaranteed income covers the floor; the portfolio funds discretionary spending.
For these high-guaranteed-income retirees, equity allocation can be much higher than age-based rules suggest. The portfolio is not funding survival; it is funding flexibility and bequest. The risk tolerance is correspondingly higher.
How to actually apply the framework
Start with the age-based rule (110 minus age in equity). Adjust upward for: high guaranteed income share, high risk tolerance, long horizon, strong bequest priority, low debt. Adjust downward for: low guaranteed income, low risk tolerance, short horizon, high debt, fixed spending need.
The adjustments rarely exceed 20 percentage points in either direction. The framework refines rather than replaces age-based starting points. The discipline is the deliberate adjustment based on household specifics.
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Common questions
Questions.
What's a good starting allocation?
110 minus age is a reasonable starting point. 30-year-old: 80% equity. 60-year-old: 50% equity. Adjust based on the framework.
Should I be 100% equity in my 30s?
Possible if risk tolerance and horizon support it. Most retail benefits from some bond allocation for psychological resilience and rebalancing potential.
What about international vs domestic?
Within the equity allocation, broad-market diversification (60–70% domestic, 30–40% international) is the standard. Strong views on relative valuation can adjust.
Is risk parity better than age-based?
Different framework. Risk parity allocates by risk; age-based by horizon. Risk parity for institutional approach; age-based simpler for retail.
What about target-date funds?
Built-in age-based glide paths. Reasonable for most retail. Customization possible by choosing target year different from actual retirement year.
How often should I rebalance to target?
Annually or threshold-based (5+ percentage point drift). Frequent rebalancing produces unnecessary turnover.
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