The Age-Based Glide Path
| Age | Stocks | Bonds | Expected Return | Why |
|---|---|---|---|---|
| 20-30 | 90-100% | 0-10% | 9-10% | Maximum growth, 30+ year horizon |
| 30-40 | 80-90% | 10-20% | 8-9% | Still aggressive, start adding bonds |
| 40-50 | 70-80% | 20-30% | 7-8% | Capital preservation begins |
| 50-60 | 60-70% | 30-40% | 6-7% | Protect gains, reduce volatility |
| 60-70 | 40-60% | 40-60% | 5-6% | Income over growth |
| 70+ | 30-40% | 60-70% | 4-5% | Capital preservation priority |
The 60/40 Portfolio in History
The classic 60% stocks / 40% bonds portfolio has returned about 8.6% annually since 1926. In the worst year (1931), it lost 27%. In 2022 — a rare year where both stocks AND bonds fell — it lost 16%. The 60/40 isn't bulletproof, but over 10+ year periods it has been remarkably reliable.
Why Not 100% Stocks Forever?
A 100% stock portfolio at age 60 is dangerous. If the market drops 40% the year before you retire (like 2008), your planned $1M retirement becomes $600K — and you're withdrawing from a depleted portfolio. A 60/40 portfolio in the same crash would drop to ~$760K. That's still painful, but recoverable. The bond cushion is insurance, not an investment — it costs you some upside to prevent catastrophic downside.
Rebalancing: The Free Lunch
If your target is 80/20 and stocks surge to 88%, sell stocks and buy bonds to get back to 80/20. This forces you to sell high and buy low — the opposite of panic selling. Rebalance once a year, or when your allocation drifts more than 5% from target.
Key Takeaways
- Age 20-30: 90-100% stocks — maximum compounding when you can handle volatility
- Age 40-50: begin the glide — shift 1-2% per year toward bonds
- Retirement: 40-60% stocks — enough growth to beat inflation, enough bonds to sleep at night
- Rebalance annually — sell winners, buy laggards