You can build wealth with three ingredients: steady contributions, low costs, and a risk level you can actually live with. Index funds make the first two effortless. This guide focuses on the third—how to set your stock/bond mix through the decades, how to adjust when life throws curveballs, and how to keep compounding through bull and bear markets without second-guessing yourself.
You’ll get age-by-age allocations, simple model portfolios, when and how to rebalance, what to do in taxable versus retirement accounts, and a calm plan for the pre-retirement years when the stakes feel highest. Keep it simple, keep it automated, and let time do the heavy lifting.
What an “allocation by age” is really solving
Asset allocation answers a human question, not a math puzzle: how much temporary loss can you tolerate on the way to your long-term goal? The trade-off is straightforward:
- More stocks = higher expected return, deeper and more frequent drawdowns.
- More bonds/cash = shallower declines, lower expected return.
Your age matters because it shapes two things: time horizon (years until you need the money) and risk capacity (your ability to recover from setbacks in income and savings). But age is not destiny. A 28-year-old with an unstable income may need more ballast than a 45-year-old tenured professor. Use the frameworks here as starting points, then fit them to your real life.
Core building blocks you’ll use at every age
- Total U.S. stock market index fund
- Total international stock index fund
- Investment-grade U.S. bond index fund (or a mix of treasuries and high-quality corporates)
- Optional: TIPS (inflation-protected treasuries), short-term treasuries for ballast, and small-cap value tilt if you enjoy a mild factor flavor.
That’s it. Three or four funds can carry you for decades.
A simple global stock split that works
If you own U.S. and international stocks, you’ve diversified across currencies, policies, and growth drivers. A 70/30 split between U.S. and international is a practical middle, with reasonable tracking error to either side. Prefer more home bias? Use 80/20. Prefer closer to world market cap? 60/40. Pick one and stick to it. Consistency beats precision.
Rule-of-thumb starting points by decade
These are default targets for someone saving steadily, with a stable job and emergency fund. Adjust up or down for your risk tolerance and job security.
- 20s: 90–100% stocks, 0–10% bonds
- 30s: 80–90% stocks, 10–20% bonds
- 40s: 65–80% stocks, 20–35% bonds
- 50s: 50–65% stocks, 35–50% bonds
- 60s (approaching retirement): 40–55% stocks, 45–60% bonds
- In retirement (early years): 40–50% stocks, 50–60% bonds, plus 1–2 years of planned withdrawals in short-term treasuries or cash
Detailed Decade Strategies
Your 20s: Build the machine
Goal: Maximize growth, set systems you won’t need to touch, and survive your first real bear market without bailing.
Suggested mix: 90–100% stocks, 0–10% bonds
Why it works
Your greatest asset isn’t your balance—it’s your future contributions. Market drops are future discounts. If you automate monthly buys, downturns become engines of share accumulation.
Playbook
- Automate contributions to your 401(k)/403(b) and IRA.
- Dollar-cost average into a total U.S. fund and a total international fund.
- Keep 3–6 months of expenses in cash for emergencies.
- Common mistakes: Stock picking, high-fee funds, and pausing contributions when headlines get loud.
Your 30s: Add resilience without losing momentum
Goal: Keep growth high while absorbing new responsibilities—mortgage, kids, career shifts.
Suggested mix: 80–90% stocks, 10–20% bonds
Upgrades that matter now
- Increase emergency fund to 6 months (12 if self-employed).
- Add term life and disability insurance.
- Asset location: hold bonds in tax-advantaged accounts; keep broad stock index funds in taxable.
Your 40s: Manage risk concentration and sequence awareness
Goal: Protect against career and market risk coincidence while compounding toward peak earning years.
Suggested mix: 65–80% stocks, 20–35% bonds
Priorities
- Diversify human capital risk: if your job is tied to the stock market, lean a bit more into treasuries.
- Tame single-stock risk: if company RSUs dominate, gradually sell into index funds.
- College funding: keep 529 plans on an independent age-appropriate glidepath.
Your 50s: Pre-retirement defense without abandoning growth
Goal: Reduce damage from a bad 5-year window before retirement (sequence-of-returns risk).
Suggested mix: 50–65% stocks, 35–50% bonds
Strategic Moves
- The “cash bridge”: Accumulate 1–2 years of planned withdrawals in cash or short-term treasuries.
- Roth strategy: Look into backdoor Roth IRA contributions or strategic conversions in low-income years.
Model portfolios you can copy
Aggressive (20s–early 30s)
- 70% Total U.S. stock index
- 25% Total international stock index
- 5% U.S. total bond index (optional)
Balanced Growth (30s–40s)
- 60% Total U.S. stock index
- 20% Total international stock index
- 20% U.S. total bond index
Pre-Retirement (50s)
- 40% Total U.S. stock index
- 20% Total international stock index
- 30% U.S. total bond index
- 10% TIPS
Portfolio Maintenance and Rules
How to rebalance without drama
- Calendar method: Once or twice a year.
- Band method: Rebalance only when an asset class drifts 5 percentage points or more.
- Tax-smart order: Use new contributions and dividends to top up laggards first.
Bonds that actually help when you need help
- Favor treasuries and high-quality investment-grade funds.
- Keep duration in the short to intermediate range.
- TIPS protect purchasing power; hold them in tax-advantaged accounts.
Tax placement: where each piece lives
- Taxable account: Total U.S. and International stock index funds.
- Tax-deferred (401k/IRA): Core bond funds, TIPS, REITs.
- Roth accounts: Highest-growth assets (equities) for tax-free compounding.
Pay yourself first: savings rate targets
- 20s: 15%+ of gross income.
- 30s: 15–20% as income grows.
- 40s: 20–25% if catching up.
- 50s: Use catch-up contributions and funnel windfalls into the plan.
Behavioral Guardrails: What to do during bear markets
- Do nothing dramatic. Confirm your emergency fund covers at least six months.
- Rebalance once if your bands are breached.
- Keep contributing. Your future self will thank you.
- Re-read your IPS (investment policy statement).
Closing the gap between plan and behavior
- Automate everything.
- Reduce tracking: stop checking accounts daily.
- Social media diet: don’t change your plan because of a thread.
- Accountability partner.
A one-page policy you can copy and customize
Goal: Retire around age __ with inflation-adjusted spending of $__ per year.
Allocation:
- Stocks __% (U.S. __%, International __%)
- Bonds __% (Treasuries/IG __%, TIPS __%)
- Cash: 3–6 months (pre-retirement) or 12–24 months (post-retirement)
Rebalancing: Annually and when any sleeve drifts >5%.
Contributions: __% of gross income automatic each payday.
Behavioral rules: I will not sell equities in a bear market.
Bottom line
An allocation by age isn’t about hitting a perfect number; it’s about owning a simple, durable mix you can keep through the only thing markets promise: change. Pick a stock/bond ratio inside the bands for your decade, automate contributions, rebalance with bands, and handle taxes with common sense. Do that for 20–30 years and you won’t need to chase fads—you’ll have built real wealth the boring, beautiful way.