Asset Allocation Calculator

The Classic Age-Based Allocation Rule

A common rule of thumb sets the stock percentage at 110 minus your age, so a 30-year-old lands on 80% stocks and a 65-year-old on 45%. The reasoning behind it is that a longer horizon leaves more time for a portfolio to recover from a downturn, while someone drawing on the money within a few years has less room for a fall to be temporary. The calculator uses 110 minus age as the baseline, held at 20 or above, and then adjusts it by risk tolerance.

Why 110 Instead of 100

The older form of the rule subtracts age from 100, and it was written when retirements were typically shorter. Rules published more recently often use 110 or 120 instead, which raises equity exposure at every age. The arithmetic is what changes: someone aged 65 gets 35% stocks under the 100 rule, 45% under 110 and 55% under 120, and a retirement running 25 years or more is a long horizon for the lowest of those to carry against inflation. This calculator is built on the 110 form plus a risk-tolerance adjustment.

Risk Tolerance Adjustment

The baseline of 110 minus age, held at 20 or above, is then moved by four percentage points for each step the risk rating sits away from five. That floor only bites past age 90: at 95 the baseline is 20 rather than 15, which is the single place the calculator departs from a literal reading of the rule. Across the 1 to 10 scale that spans −16 to +20 percentage points, an asymmetric band because the adjustment pivots on five rather than on the 5.5 midpoint of the scale itself. A rating of 5 returns the unadjusted baseline. For a 40-year-old on a baseline of 70%, a rating of 3 gives 62% and a rating of 10 gives 90%. Risk tolerance here covers both comfort with volatility and the financial capacity to absorb a fall without changing plans, and the two do not always point the same way.

The Bond and Cash Split

Whatever is not in stocks is divided 75% to bonds and 25% to cash. Cash covers near-term spending and an emergency reserve, held in whatever instant-access or short-dated instrument is available locally, while bonds cover medium-term needs and act as portfolio ballast. The split between those two matters less than the stock versus non-stock decision, since both are low-volatility components. The ratio here is fixed: the calculator has no input for a known upcoming expense such as a house deposit or a tuition bill, so a portfolio carrying one of those would hold more cash than the model shows.

Worked Example

Age 40, risk tolerance 6, total portfolio 250,000. Base stock allocation: 110 − 40 = 70%. Risk adjustment: +4 percentage points. Final stock: 74%. Bond allocation: 75% of the remaining 26% = 19.5%. Cash: 6.5%. Currency allocations: 185,000 stocks, 48,750 bonds, 16,250 cash. Compare a 40-year-old at risk 3: stock 70 − 8 = 62%, bond 28.5%, cash 9.5%.

When Rules of Thumb Break Down

A large fixed income from a pension or annuity behaves like a bond holding, which changes what the rest of the portfolio has to do. Where annual spending is small relative to the portfolio, age constrains the allocation less than the rule implies. A short-term goal sitting inside the portfolio, such as a house deposit three years out, is a different problem from the long-term allocation, and the rule does not separate the two. Someone close to retirement may be more concerned with the order of the early returns than with their average, which is a question about the sequence of withdrawals rather than about the stock percentage. The calculator produces one number from two inputs, and each of these situations is information it does not have.

Why the Rule Uses Age Rather Than Years to Retirement

Age is the input the rule takes, and it is not quite the variable the reasoning points at. What that reasoning describes is the time remaining before the money is drawn on, which is age at retirement minus age now. Someone at 45 planning to stop at 50 and someone at 45 planning to stop at 70 both receive the same 65% baseline here, despite horizons that differ by twenty years. Age stands in for that horizon only where the two move together, and it stops working wherever they do not: early retirement, phased retirement, or a portfolio that is never drawn down at all. Nothing in the model detects the difference.

What the 75/25 Non-Stock Split Does and Does Not Decide

The split applies only to the part of the portfolio that is not in stocks, so at a 74% stock allocation it divides the remaining 26% into 19.5% bonds and 6.5% cash. Moving it barely registers against the stock decision, since shifting the whole non-stock quarter between cash and bonds alters a small slice of a portfolio whose volatility is dominated by the other three-quarters. It also says nothing about what sits inside each bucket: bond duration, credit quality, and whether the cash earns anything are all outside the model.