120 Rule Calculator

What the rule of 120 says

The rule of 120 is a one line formula for splitting a portfolio between stocks and bonds. Subtract your age from 120 and hold that percentage in stocks; whatever is left goes into bonds. A 40 year old holds 80 percent in stocks and 20 percent in bonds, a 55 year old holds 65 and 35, and a 70 year old holds 50 and 50. Age is the only variable, and 120 is the only number you have to remember.

The idea is a glide path. Stocks carry more risk and more growth, so the rule hands a young saver a heavy stock share and trims it one point for every birthday. A 30 year old starts at 90 percent in stocks and a 65 year old ends near 55, without a single forecast or market call along the way. The pace never changes, which is the appeal and the limitation at the same time.

The concept behind the subtraction is called asset allocation. Investor.gov describes allocation as the way an investor divides a portfolio among asset classes, and it lists goals, time horizon and risk tolerance as the inputs a real allocation should weigh. The rule of 120 compresses all three into age alone, which is why it works as a starting point and fails as a finishing point.

Worked example: age 40 with 100,000 dollars

Take a 40 year old with 100,000 dollars invested. The stock share is 120 - 40 = 80 percent, so 0.80 x 100,000 = 80,000 dollars goes into stock funds. The bond share is 100 - 80 = 20 percent, and 0.20 x 100,000 = 20,000 dollars goes into bond funds. The two lines add back to the original 100,000, which is the check that the split is complete.

Read the table as a schedule rather than a deadline. Moving down a row is a decade of aging, and the stock share drops 10 points at each step. That 10 point pace is the personality of the rule: slow enough to ignore in any given year, steady enough to leave a 70 year old holding about half the stock risk of a 30 year old.

Where the number 120 came from

The oldest version of the idea is the rule of 100, often credited to John Bogle, the founder of Vanguard, who suggested holding roughly your age in bonds. A 60 year old under the rule of 100 keeps 40 percent in stocks. As life expectancy stretched and retirements began running 25 to 30 years, the constant drifted upward: 110 for a middle path, 120 for a growth tilt, 130 for an aggressive one.

Each step of 10 points changes the character of the portfolio. Between the 100 and 120 variants sits a 20 point gap in stock exposure at every age, and 20 points is the difference between a portfolio that leans on interest and one that grows with the market. The right constant depends on how long the money must last and how a bad decade would feel, which is why the calculator on this page lets you switch the base between 100, 110, 120 and 130.

The four rules side by side

Pick any age and the four variants bracket a 30 point spread of stock share. The table shows the stock percentage each rule produces at three ages.

A 50 year old following the rule of 100 holds half the portfolio in stocks, while the same investor following 130 holds 80 percent, a mix closer to a young saver's than a pre-retiree's. The four rules fence in the honest answer; the truth sits somewhere inside, set by the size of any pension, the stability of your paycheck and whether the money carries a date. That is why the variants are useful as a range, and a single number is useful only as a default.

Worked example: a 250,000 dollar 401(k) at age 52

Now a real balance. A 52 year old with 250,000 dollars in a 401(k) gets 120 - 52 = 68 percent in stocks. That is 0.68 x 250,000 = 170,000 dollars, leaving 0.32 x 250,000 = 80,000 dollars in bonds. Suppose the account has drifted and currently holds 190,000 in stock funds and 60,000 in bond funds. Rebalancing to the rule means moving 20,000 dollars from stocks into bonds until the two sleeves sit at 170,000 and 80,000.

The same balance under all four variants shows how wide the choice is at one age.

The move also resets the risk. A portfolio at 76 percent stocks is running 8 points hotter than the 120 rule suggests, and drift tends to compound: the longer the rebalance waits, the larger the trade becomes. Many workplace plans offer automatic rebalancing on a schedule, and the Employee Benefits Security Administration publishes the fee and disclosure rules those plans have to follow, which turns the rule into a once a year habit instead of a project.

What the rule gets wrong

Age is a crude stand in for risk tolerance. Two 55 year olds with matching balances may need opposite mixes: one has a pension that covers every bill, and the other draws living expenses from the portfolio itself. The rule cannot see either situation. It also ignores goals, because money earmarked for a house in three years has no business riding the same glide path as money earmarked for a retirement decades away.

Sequence risk is the other blind spot. A 65 year old holding 55 percent stocks under the rule can still lose a large slice of the stock sleeve in a bad year, and withdrawals taken during that dip lock in the loss. Rules of thumb assume no money is leaving the portfolio; retirees break that assumption in the first month.

Treat the output as a compass heading rather than a target. Let the things a subtraction cannot see, such as health, income sources and family plans, move you a few points in either direction. This page is general education, not individual investment advice, and a fee only planner can weigh the details the formula never will.

Using the number in practice

Three habits make the rule usable. First, check the split once a year, on a birthday or a fixed date; the rule moves one point a year, so the trade is rarely large. Second, steer with new contributions when you can: directing every paycheck into the underweight sleeve rebalances the portfolio without selling anything or triggering taxes in a taxable account. Third, fill each sleeve with broad index funds, because the rule assumes the stock side behaves like the whole market rather than a single bet.

Target date funds automate this exact kind of glide path, typically stepping the stock share down over decades. If you already own one, run its current mix against the calculator: a fund dated for a 45 year old often lands between the 110 and 120 variants. The comparison tells you whether the fund is steering where you would steer yourself, and it costs nothing to check.

How the calculator handles the variants

The widget applies the same subtraction to all four bases: stock share equals the base minus your age, and the bond share is 100 minus the stock share. Enter an age alone to see the percentages, or add a portfolio value to see the split in dollars. The results table also shows the stock share ten years later, which is the pace you should expect to rebalance toward.

The dollar rows round to whole dollars, so a 100,000 dollar portfolio at age 40 shows 80,000 in stocks and 20,000 in bonds, matching the worked example above. If the age and base ever produce zero percent stocks, the tool says so rather than showing a row of zeros. Every computation happens locally in your browser, and nothing you type is stored or sent anywhere.