What asset allocation is right for your age and risk tolerance?
The rule that says hold your age in bonds is a rule about age and nothing else, and age is the least useful of the three inputs. What decides the right allocation is how much of your spending is already covered by guaranteed income, how long the portfolio has to last, and what you will actually do in a bad year.
- The horizon: a couple retiring at 60 may need the money to work for 35 years.
- The floor: spending covered by State Pension and defined benefit income does not need a portfolio.
- The behaviour: an allocation you will abandon in a fall is worse than a more conservative one you will hold.
- The age rule: a rough proxy that ignores all three.
Tom retired at 58 with a full State Pension record and a small defined benefit pension from his twenties. Between them they cover most of what he spends, which is why his portfolio can hold more equities at 58 than it did at 45.
01 Why the age rule fails
Hold your age in bonds is a heuristic from an era of shorter retirements and defined benefit pensions, and it produces an allocation that is far too cautious for a modern thirty-five year horizon. A 65-year-old holding 65% bonds is planning for a portfolio that has to survive three decades of inflation with most of it in fixed income.
It also treats two households with wildly different circumstances identically. A retiree whose State Pension covers their essential spending is in a completely different position from one whose portfolio funds everything, and their allocations should not match.
The rule survives because it is memorable and because it errs toward caution, which feels responsible. The cost of that caution over a long retirement is a portfolio that runs out of purchasing power rather than out of money.
Source: FCA consumer information
02 The guaranteed income floor
Start by subtracting guaranteed income from spending. The State Pension, any defined benefit pension and any annuity are inflation-linked or fixed income that arrives whatever markets do, and the portfolio only has to fund the difference.
A household spending £34,000 with £25,000 of guaranteed income has a portfolio funding £9,000 a year. That portfolio can hold a high equity weighting, because a bad decade means a smaller top-up rather than a smaller life.
The same household with no guaranteed income at all is asking a portfolio to fund everything, and it cannot afford the same volatility. That difference is far larger than any age effect, and it is the first calculation to do.
Shows: the share of your spending the portfolio actually has to fund, once guaranteed income is subtracted. Ignores: returns, inflation, tax, and your own tolerance for a fall.
On the defaults above, the worked example shows 3.0%. The portfolio funds £8,905 a year, which is 3.0% of it — a low enough draw to carry a high equity weighting.
Source: The new State Pension
03 The horizon is longer than people assume
Cohort life expectancy at 65 is in the mid-eighties, and the chance of at least one member of a couple reaching 95 is not remote. A plan built on a thirty-year horizon for a couple retiring at 60 is planning to age 90 for both, which is optimistic in the wrong direction.
Length is what argues for equities. Over thirty-five years inflation roughly halves the purchasing power of a fixed income at 2% and does far worse at 4%, so a portfolio dominated by conventional bonds is guaranteed to lose ground in real terms.
The horizon is also not uniform. Money needed next year and money needed in year thirty are different assets with different requirements, which is the insight the bucket approach formalises.
Source: National life tables, UK
04 What you will actually do
The best allocation on paper is worthless if you abandon it. A retiree who sells at the bottom of a 35% fall has converted a temporary decline into a permanent one, and would have done better in a portfolio they could hold.
The honest test is historical rather than hypothetical. What did you do in 2008, 2020 and 2022? Someone who reduced risk at each low point should build a plan around that fact rather than around an intention to behave differently next time.
Structures help more than resolve does. A cash buffer, a written cut rule, and a guaranteed floor all reduce the pressure to act, which is why they belong in the allocation decision rather than beside it.
Source: Retirement income market data
05 Putting a number on it
Work out the portfolio's job: annual spending less guaranteed income, multiplied by the years it has to cover. Hold the next one to two years of that in cash, the following five to ten in bonds and lower-volatility assets, and the rest in equities.
For most UK households with a full State Pension record that produces an equity weighting well above what an age rule would suggest — often 60% to 75% at 65 rather than 35%. That is not aggressive; it is what a thirty-five year horizon with a guaranteed floor supports.
Then review it when the facts change rather than annually by default. The State Pension starting, a defined benefit pension coming into payment, or an annuity purchase each raise the floor and permit more equity, not less.
Source: Plan your retirement income
Do the subtraction first. Spending minus guaranteed income is the number that decides your allocation, and for a UK household with two full State Pension records it is often far smaller than people expect. A portfolio funding £9,000 a year out of £300,000 is drawing 3% and can hold three quarters in equities without any drama, at 65 or at 75. The age rule would put that household in bonds and guarantee them a slow real-terms decline. Age is a proxy for horizon and horizon is what matters — so use horizon.
FAQ
Is 'hold your age in bonds' wrong?
It is a proxy for horizon that ignores guaranteed income and ignores how long the money has to last. For a couple retiring at 60 with full State Pension records it produces an allocation far too cautious for a thirty-five year horizon.
Should I hold fewer equities once I retire?
Not necessarily. A household whose essential spending is covered by State Pension and defined benefit income can often hold more equities in retirement than during accumulation, because a bad decade means a smaller top-up rather than a smaller life.
How long should I plan for?
Longer than you think. Cohort life expectancy at 65 is in the mid-eighties and the chance of one member of a couple reaching 95 is not remote, so planning to 90 for both is optimistic in the wrong direction.
What if I know I will panic in a fall?
Then build for that. An allocation you abandon at the bottom is worse than a more conservative one you hold, and a cash buffer, a written withdrawal rule and a guaranteed income floor all reduce the pressure to act.
Sources
Regulator references
- FCA consumer information · Financial Conduct Authority · 2025The regulator's own consumer guidance on the products discussed here.Last verified: 2026-09-07
- The new State Pension · GOV.UK · 2025Sets the qualifying-year rules and the full new State Pension rate this post works from.Last verified: 2026-09-07
- National life tables, UK · Office for National Statistics · 2023Cohort life expectancy at 65, which sets the planning horizon here.Last verified: 2026-09-07
- Retirement income market data · Financial Conduct Authority · 2025What UK savers actually do at retirement, measured rather than assumed.Last verified: 2026-09-07
- Plan your retirement income · GOV.UK · 2025The government's own sequence for turning pension pots into income.Last verified: 2026-09-07
Calculator unit tests · the assertions this page's worked example is checked against, and their last result
Changelog
- 2026-09-07 — initial publish (new format)
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Jordan Reeves
Founder of Talk Through Wealth. A software engineer for over a decade before turning to retirement planning, Jordan built the projection engine after watching family members get fragmented, country-by-country advice that never reconciled. He writes about retirement the way the engine computes it: month-by-month, lifetime-long, and skeptical of any rule of thumb that hasn't been run through the math.