Age-in-Bonds Rule: A 2026 Update for Your Allocation

The age-in-bonds rule is popular because it fits on a sticky note: pick a number, subtract your age, and you have a stock percentage. The title mentions an “update nobody’s making,” and the useful update is not a new constant. It is a short list of adjustments that turns the rule into a better starting point for your own situation. This post shows the arithmetic, what the rule leaves out, and a way to use it that stays simple.

How the Rule Works

AdviceOnly explains that the rule sets your stock percentage at a constant minus your age, with the rest in bonds and cash. The three common versions use 100, 110 or 120. The page calls these rules of thumb from investor education and personal finance writing, not regulator standards. The 110 and 120 versions were proposed as corrections, with the argument that longer retirements and inflation make the 100 version too conservative (AdviceOnly).

Age	Stocks (100 / 110 / 120)
25	75% / 85% / 95%
40	60% / 70% / 80%
60	40% / 50% / 60%

The constant matters. AdviceOnly gives an example of a 60-year-old with $600,000: the three versions give 40%, 50% and 60% in stocks, which is $240,000, $300,000 and $360,000. The choice of constant alone creates a $120,000 spread in stock exposure (AdviceOnly). The same spread appears at every age because the constants differ by 10 points each, which makes 20 points between the first and last.

Age in Bonds Rule: An Example With Assumed Numbers

Suppose a 40-year-old has a $200,000 portfolio. The 100, 110 and 120 versions give stock amounts of $120,000, $140,000 and $160,000. The portfolio and age are assumed. The difference between the first and last versions is $40,000, which is why choosing a constant is really choosing a level of risk you can hold through a decline.

The Real Starting Point: Time Horizon and Risk Tolerance

The SEC’s investor education site says asset allocation depends on time horizon and risk tolerance. A longer horizon may make a more volatile investment more comfortable because there is more time to recover from downturns, while a shorter horizon typically calls for less risk. It also states that “there is no single asset allocation model that is right for every financial goal.” The site adds that large company stocks as a group lost money on average about one year in three, while bonds are generally less volatile and cash is the safest category (Investor.gov).

The Update: Six Adjustments

AdviceOnly lists what the simple rule ignores and how to adjust when using it as a starting point (AdviceOnly):

Guaranteed income. Pensions and Social Security that cover essential spending can support a higher stock allocation.
Short spending horizon. Money needed within a few years generally does not belong in stocks.
Portfolio size. A large surplus can absorb more risk, while a portfolio that is barely adequate has less room for loss.
Income stability. Unstable income argues for a more conservative mix.
Risk tolerance. Willingness to hold through declines matters as much as ability to bear them.
Outside assets. Emergency cash is generally excluded from the portfolio, and home equity or a business may inform the broader judgment.

Keeping the Mix on Track

Investor.gov describes rebalancing as returning the portfolio to its original mix, with an example of a 60% stock target that grows to 80% after a market rise. It lists three methods: sell over-weighted categories and buy under-weighted ones, buy new investments for under-weighted categories, or direct ongoing contributions toward under-weighted categories. It suggests rebalancing on a calendar schedule, such as every six or twelve months, or when a category moves beyond a preset percentage (Investor.gov).

When a Target-Date Fund Is the Simpler Choice

The Department of Labor describes target-date funds as holding a mix of stocks, bonds and other investments that automatically shifts and becomes more conservative as retirement nears. It notes that funds with the same target date can differ in strategy, glide path and fees, which can significantly affect performance. A “to” fund reaches its most conservative level at the target date, while a “through” fund keeps reducing equity exposure afterward (U.S. Department of Labor). AdviceOnly adds that a target-date fund knows only the target year, so it has no information about your income, other resources or risk tolerance (AdviceOnly).

Fees are worth comparing. The Department of Labor’s example is a $25,000 balance earning 7% on average with no further contributions over 35 years: a 0.5% fee yields about $227,000 and a 1.5% fee about $163,000 (U.S. Department of Labor). I checked the arithmetic: $25,000 growing at 6.5% a year for 35 years is about $226,556, and at 5.5% it is about $162,846.

Best and Worst Years for Each Side of the Rule

The rule splits money between stocks and “bonds and cash,” but those two can behave differently. The NYU Stern table of annual returns for 1928–2018 shows the S&P 500 including dividends ranging from −43.84% (1931) to +52.56% (1954), the 10-year Treasury bond from −11.12% (2009) to +32.81% (1982), and the 3-month Treasury bill from +0.03% (1940 and 2011) to +14.30% (1981) (NYU Stern (Damodaran) historical returns table). The version I opened ends in 2018, and these are index returns for single calendar years, not a forecast.

Apply the extremes to the 60-year-old with $600,000 from the AdviceOnly example, using the 110 version (50% stocks). The $300,000 stock side facing a −43.84% year would lose $300,000 × 0.4384 = $131,520. The $300,000 non-stock side held in 10-year Treasury bonds facing −11.12% would lose $300,000 × 0.1112 = $33,360, and held in 3-month bills the worst year in the table was +0.03%, a gain of $90. For comparison, 100% stocks at the same −43.84% would lose $600,000 × 0.4384 = $263,040. These are each asset’s own worst year, which did not happen in the same year, so they should not be added together.

This adds a detail to the rule’s “bonds and cash” half. The money you expect to need in the next few years, which the six adjustments say generally does not belong in stocks, can sit in the bill-like end where the table shows the smallest declines, while the rest of the non-stock side can sit in bonds. Splitting that half is my suggestion; the table supplies the range of past outcomes for each type.

My Take on Age in Bonds Rule

In my view, choosing the constant is choosing a risk level, so pick the version whose worst year you could live with.
In my view, the six adjustments are the real update. Going through them once turns the rule from a slogan into a plan.
In my view, separating money you expect to spend soon from the rest of the non-stock part is a sensible refinement, since AdviceOnly says money needed within a few years generally does not belong in stocks. The rule itself says only “bonds and cash.”
In my suggestion, write down your chosen mix and a rebalancing date, using the calendar approach Investor.gov describes.

Sources

This article offers general information and my own opinions, not financial, tax, or legal advice. The figures in worked examples are assumed. Laws, tax rules, and products change and can differ by location, so check current official sources and talk to a qualified professional about your own situation.

Age in Bonds Rule — The 2026 Update Nobody’s Making