Investing Through Your Life

Why allocation should change with age

The reason to hold stocks is that, over long stretches, they grow more than bonds or cash. The reason not to hold stocks is that they can drop sharply in any single year. Those two facts pull in opposite directions — and the tension between them is exactly what time horizon resolves.

A 25-year-old has roughly 40 years before they spend retirement money. Even the worst historical 40-year stretches for stocks ended up positive. They can afford to ride out a 2008-style crash because they have decades of working years left to make up the loss. A 64-year-old retiring next year doesn't have that luxury. A 35% drop in their portfolio in the year they retire can permanently shrink the income their savings will support.

What a glidepath is

A glidepath is a recipe that says how much of your portfolio should be in stocks at each age. The classic shape: high stock share when you're young, declining smoothly toward something like 30–40% stocks at retirement, then either holding steady or continuing to decline through retirement.

This page uses a simple linear glidepath: stocks fall in a straight line from your starting percentage at your current age to your ending percentage at retirement age, then hold flat. The remaining allocation is split 75% bonds, 25% cash. Real-world target-date funds use slightly more elaborate curves, but the lesson is the same.

Target-date funds

A target-date fund (sometimes called a lifecycle fund) packages this whole idea into a single mutual fund. You pick the fund with the year closest to when you'll retire — "Vanguard Target Retirement 2055" if you'll retire around 2055 — and the fund itself shifts from aggressive to conservative on a glidepath. Trillions of dollars sit in these funds because they remove the hardest part: remembering to rebalance and de-risk every year.

The "100 minus your age" rule

A classic rule of thumb says your stock allocation should be roughly 100 minus your age — so 75% stocks at age 25, 35% at age 65. With longer lifespans, many advisors now use 110 or 120 minus your age for more aggressive paths. The default settings on this page (90% at 25, 30% at 65) sit close to "120 minus age, capped at 90%." Try different endpoints to see how it changes the outcome.

What the chart shows

The main chart runs along your age, from your current age to the end of your plan, with three vertical markers: when you start investing, when you retire, and when the plan ends. The single line is your portfolio. The solid part is built from real market history; the dashed parts use average returns — the early saving years before our data begins, and any retirement years that run past the end of our data. During working years the line climbs as you add money; after the retirement marker it lives off withdrawals, and you can watch whether the market you retired into lets it keep growing or grinds it down.

What a withdrawal rate is (and the 4% rule)

A withdrawal rate is the percentage of your savings you spend in your first year of retirement. The famous version is the 4% rule: research found that retirees who took 4% of their nest egg in year one — say $40,000 from $1,000,000 — and adjusted from there rarely ran out over a 30-year retirement. Lower rates like 3.5% are even safer, trading a bit of yearly income for more cushion against a bad market.

Notice the rate is a percent of your portfolio, not your salary. That's why this page first projects how big your nest egg gets, then multiplies by your withdrawal rate to set your income. Drag the market era and you'll see that number move — retire after a strong run and the same 3.5% buys a richer retirement; retire after a weak stretch and it buys less, before a single crash has even hit your withdrawals.

The role of contributions and withdrawals

Without contributions or withdrawals, the page would just be a fancy compounding calculator, and "more stocks" would always win. The whole point of a glidepath is to handle the moment when you switch from adding money to taking money out. Sequence-of-returns risk — having a crash right when you need to start selling — is most dangerous in the first few years of retirement. A glidepath reduces this risk by being less stock-heavy at exactly that moment.

Why you "retire into" a year of history

Here's the hard problem with any retirement chart: the retirement you care about is in the future, and nobody has the future's market returns. A normal backtest dodges this by replaying the past — but a full plan (say age 25 to 90) is 65 years long, and we only have about 46 years of market data. The plan simply doesn't fit inside history.

So this page flips the problem around. Instead of guessing the future, it drops your retirement phase directly on top of real market history and lets you slide which stretch of history that is. "Retire into 2000" means your withdrawals play out over the actual returns of 2000 onward — dot-com crash, 2008, COVID, and the recoveries in between. The real market does the job of "an uncertain future," because to a 2000 retiree, all of that was the future.

If you set the line late — close to today — your retirement eventually runs out of real history. Those leftover years are projected at average returns and drawn as a dashed line, so you can tell exactly which part is real and which is a smooth guess. The takeaway is built into the picture: the earlier you retire into our data, the more of your drawdown is tested against genuine crashes, and the more you can trust what the chart is telling you.

Why the market chart uses a log scale

A normal chart — a linear scale — spaces equal dollar gaps equally. That sounds fair, but it badly distorts a market that grows over time. A broad U.S. stock investment has multiplied many times over since 1980, so a fixed dollar gap means completely different things early versus late. Early on, a small percentage swing is only a few dollars and looks like nothing; decades later, the same percentage swing is a huge number of dollars and looks dramatic. On a linear chart the early decades get squashed into a flat line and only recent swings stand out.

A log scale fixes this by giving equal percentage moves equal height. A 20% drop takes up the same vertical space whether the market is at $1,000 or $5,000. Because your portfolio rises and falls in percentages — a 30% crash hurts the same no matter the index level — the log view is the honest one. It's why the 1987, 2000, 2008, and 2020 crashes are all clearly visible on the selector and can be compared at a glance. That's the whole point: you're choosing which era to retire into, so you need to actually see how rough each one was.

Why those crashes look small in hindsight

Look at the market chart and you'll notice something reassuring: the 1987 crash, the dot-com bust, the 2008 financial crisis, and the 2020 COVID drop — each terrifying while it happened — now look like small notches on a line that keeps climbing. That's the reward for a long time horizon. Every one of those crashes was fully recovered, and then some, within a few years. For a young saver, this is the whole argument for holding stocks and not panic-selling: given enough time, declines have always been temporary.

But here's the catch this page is built around. Those crashes only look small if you weren't forced to sell into them. A 25-year-old who rode out 2008 saw their balance recover and grow. A 66-year-old who retired in 2007 and had to sell investments every year to pay the bills locked in those losses — they never got to wait for the rebound. Same crash, opposite outcome. That is sequence-of-returns risk again, and it's exactly why a calm-looking dip on this chart can still sink a retirement that happens to start right on top of it. The chart's reassurance is real for savers and a trap for new retirees.

Why the early years use average returns

The saving years that fall before our data begins are filled in with average returns — a smooth line instead of real ups and downs (it's the faint dashed part of the chart). That's a deliberate shortcut, and it's defensible because of when volatility actually hurts. While you're saving, you're buying every year; a crash is partly a discount, and the order of good and bad years barely changes where you end up. So approximating those years with an average costs you very little realism.

The drawdown years are the opposite. Once you're selling investments to fund withdrawals, a crash early in retirement forces you to sell more shares at low prices, and the portfolio may never recover. That's sequence-of-returns risk, and it's the whole reason this page exists — so those years get real, jagged market history, never an average.

One thing this trade-off removes

Because the saving years use a smooth average, your balance on the day you retire is the same every time for a given set of inputs — there's no luck in the accumulation phase. That's on purpose: it isolates the one variable the page is trying to teach, which is how much your outcome depends on the market you happen to retire into. In real life accumulation has its own ups and downs too, but they matter far less than the sequence you hit right after you stop working.

What this model doesn't include

The stock series here is the broad U.S. stock market from the Fama/French research data — a total-return series that already includes reinvested dividends. Bond returns are modeled with the 10-Year Treasury yield as a benchmark — a stand-in for high-quality bonds in general. Cash uses a yield equal to the 10-year minus 1.5 percentage points, floored at 0.25%. There are no taxes, transaction fees, or inflation adjustments. Your salary stays flat (no raises), and both your savings and your withdrawals are fixed dollar amounts that don't rise with inflation — so think of every figure here as being in today's-style dollars. Because of that, a withdrawal looks like it stretches further than it really would over 30 years, and big nominal ending balances overstate true buying power. Real retirement planning adjusts all of this for the rising cost of living.

Source: Kenneth R. French Data Library. U.S. market return calculated from the Fama/French monthly research factors as Mkt-RF plus RF. Bond and cash tiers use the 10-Year U.S. Treasury yield.

Key takeaway

For most people, the best allocation isn't a single number — it's a path. Be aggressive when you're far from needing the money. Get more conservative as you get closer. A target-date fund does this automatically; if you'd rather steer yourself, the slider settings on this page are a reasonable place to start. For real money decisions, talk with a qualified financial planner.