How much of my portfolio should be in bonds when I retire?
Most retirement research supports holding 30%–50% bonds in early retirement to buffer sequence-of-returns risk, with a common starting point of 40% bonds at age 65. However, early retirees (40s–50s) often hold 20%–30% bonds given longer growth horizons. The right allocation depends on your withdrawal rate, spending flexibility, and other income sources.
Formula
Conservative starting point: Bond % = 110 minus your age (modern revision of the old 'age in bonds' rule). Adjust down 10–15 points if retiring before age 55.
Example
A 60-year-old retiring with a $2M portfolio and $80,000/year in spending (4% withdrawal rate) starts with 40% bonds ($800,000) and 60% equities ($1,200,000). Under Kitces's rising glidepath, by age 75 they shift toward 70% equities as sequence risk has passed.
How it works in detail
Bond allocation in retirement is one of the most debated topics in retirement planning, and the answer has shifted considerably over the past decade. The traditional rule — 'your age in bonds' — would put a 65-year-old at 65% bonds. Most modern researchers consider this far too conservative. William Bernstein, Wade Pfau, and Michael Kitces generally support a 30%–50% bond range at retirement, with the specific allocation driven by your withdrawal rate and income flexibility. Kitces and Pfau's research on 'rising equity glidepaths' suggests actually starting retirement with higher bond allocations (40–50%) and increasing equity exposure over time — the opposite of conventional wisdom. This strategy reduces sequence-of-returns risk in the critical first decade of retirement when large losses are most damaging. For early retirees with 40–50 year horizons, lower bond allocations (20–30%) are often appropriate because the portfolio needs decades of real growth. Social Security, pensions, or part-time income can substitute for bonds as a volatility buffer. A practical framework: if your portfolio withdrawal rate is under 3%, equity-heavy allocations (70–80%) are more defensible. At 4%+ withdrawal rates, 30–50% bonds meaningfully improves survival odds across Monte Carlo simulations.
Model how different bond allocations affect your retirement success probability using finai.app's Monte Carlo retirement calculator.
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What is Monte Carlo simulation for retirement planning?
Monte Carlo simulation tests your retirement plan against 1,000+ randomized market return sequences to estimate your probability of success (never running out of money). Unlike average-return projections, it captures sequence-of-returns risk — the danger that a market crash in your first few retirement years permanently impairs your portfolio.
What is the right asset allocation (stocks vs bonds) by age?
A common starting rule: hold your age in bonds (30 years old = 30% bonds, 70% stocks). But modern research suggests more aggressive: 110 minus your age in stocks. A 35-year-old with 30+ years to retirement should hold 75–90% stocks. Reduce to 50–60% stocks by retirement age.
What is sequence of returns risk?
Sequence of returns risk is the danger that poor market returns in the first few years of retirement permanently damage your portfolio, even if long-term average returns are normal. A -20% crash in year 1 of retirement is far more destructive than the same crash in year 10, because you're withdrawing from a shrinking base.
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