{
  "meta": {
    "title": "The 9-Variable Asset Allocation by Age Framework",
    "titleHtml": "The 9-variable <em>allocation by age</em> framework.",
    "description": "Age-based allocation rules ('100 minus age in equity') are too simple. Nine variables — guaranteed income, debt, risk tolerance, horizon — produce household-specific allocation across the lifecycle.",
    "dek": "Age is one input. Eight more determine the right allocation across decades.",
    "datePublished": "2026-01-27",
    "dateModified": "2026-01-27",
    "section": "Equity Strategy",
    "readMinutes": 5,
    "wordCount": 800,
    "keywords": ["asset allocation by age", "100 minus age rule", "glide path", "equity allocation", "age-based investing", "lifecycle investing", "human capital", "asset allocation rule"]
  },
  "problem": {
    "headline": "Two 60-year-olds with the same age can have 40-percentage-point allocation differences.",
    "price": "+/- 40 pp",
    "priceLabel": "Equity allocation gap for same-age households",
    "body": "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."
  },
  "indicatorsHeading": {
    "title": "The nine variables",
    "em": "of allocation.",
    "sublede": "Each modifies the age-based starting point. The composite produces the household-specific equity-bond allocation."
  },
  "indicators": [
    {"title": "Age and remaining horizon", "metric": "Pattern: longer horizon = more equity", "detail": "Longer horizons can absorb more equity volatility. The base age rule captures this."},
    {"title": "Guaranteed income (Social Security, pension)", "metric": "Pattern: more = more equity", "detail": "Households with substantial guaranteed income can take more risk on the portfolio. Pension and SS effectively act as bond-equivalents."},
    {"title": "Human capital remaining", "metric": "Pattern: working = bond-like income stream", "detail": "Working-age earners have human capital that acts as a bond-equivalent. More years of work supports more portfolio equity."},
    {"title": "Risk tolerance", "metric": "Pattern: behavioral resilience", "detail": "Self-knowledge of behavioral resilience matters. A 90% equity allocation requires the holder to stay invested through 50% drawdowns."},
    {"title": "Debt obligations", "metric": "Pattern: high debt = more bonds", "detail": "Households with significant debt face cash-flow pressure that argues for more bond stability."},
    {"title": "Spending need flexibility", "metric": "Pattern: flexible vs fixed", "detail": "Households whose spending can flex with income can take more risk. Fixed-spending retirees need more bond stability."},
    {"title": "Tax-rate trajectory", "metric": "Pattern: bracket changes", "detail": "Anticipated tax-rate changes affect after-tax allocation. Roth-heavy holders can take more equity risk because the tax is paid."},
    {"title": "Inflation exposure", "metric": "Pattern: real spending need", "detail": "Long horizons amplify inflation impact. Longer horizons argue for more equity (which historically beats inflation) and TIPS exposure."},
    {"title": "Bequest priority", "metric": "Pattern: high bequest = longer effective horizon", "detail": "Households with strong bequest priorities have effective horizons extending into next generation. More equity may be appropriate."}
  ],
  "body": [
    {
      "h2": "Why age alone is insufficient",
      "paragraphs": [
        "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."
      ]
    },
    {
      "h2": "Human capital as a bond",
      "paragraphs": [
        "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."
      ]
    },
    {
      "h2": "Guaranteed income changes everything in retirement",
      "paragraphs": [
        "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."
      ]
    },
    {
      "h2": "How to actually apply the framework",
      "paragraphs": [
        "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."
      ]
    }
  ],
  "faqs": [
    {"q": "What's a good starting allocation?", "a": "110 minus age is a reasonable starting point. 30-year-old: 80% equity. 60-year-old: 50% equity. Adjust based on the framework."},
    {"q": "Should I be 100% equity in my 30s?", "a": "Possible if risk tolerance and horizon support it. Most retail benefits from some bond allocation for psychological resilience and rebalancing potential."},
    {"q": "What about international vs domestic?", "a": "Within the equity allocation, broad-market diversification (60–70% domestic, 30–40% international) is the standard. Strong views on relative valuation can adjust."},
    {"q": "Is risk parity better than age-based?", "a": "Different framework. Risk parity allocates by risk; age-based by horizon. Risk parity for institutional approach; age-based simpler for retail."},
    {"q": "What about target-date funds?", "a": "Built-in age-based glide paths. Reasonable for most retail. Customization possible by choosing target year different from actual retirement year."},
    {"q": "How often should I rebalance to target?", "a": "Annually or threshold-based (5+ percentage point drift). Frequent rebalancing produces unnecessary turnover."}
  ]
}