Most people don't come to us wanting a specific asset allocation. They come to us wanting to take the trip to Italy, pay for the wedding, make the donation to the church, and have enough left over to spoil the grandkids.
That's why we don't start with a formula.
Why the rules of thumb don't work
You've probably heard some version of "100 minus your age equals your stock allocation." The idea is that a 65-year-old should hold 35 percent in stocks and 65 percent in bonds.
For most of our clients, that math doesn't reflect reality.
If Social Security covers part of your monthly expenses, a pension covers another part, and your portfolio covers the rest, your actual exposure to market risk is nothing like what the formula suggests. Two retirees with identical portfolios can have entirely different risk pictures depending on what's coming in the door each month.
Steady income from Social Security, a pension, or both works like a floor under your lifestyle. It's the part of your plan the market can't touch. For a client with a solid floor, an 80/20 portfolio can actually be more conservative in practice than the rule of 100's 35/65 allocation would be for someone without one. Same labels, very different pictures.
Rules of thumb ignore all of that. They reduce a life to an age.
The other extreme we avoid
Some planning philosophies solve for market volatility by having clients pull back on spending when markets are down. In practice, that means skipping the trip this year, delaying the renovation, giving less to the kids.
We don't want that for you.
If the plan only works when you're willing to shrink your life every time the S&P has a bad quarter, it isn't really working. We want you taking the trip, writing the check, and making the memories with your kids and grandkids in years when the market cooperates and years when it doesn't.
That doesn't mean going fully conservative at retirement. Sitting entirely in bonds has its own problems, especially with inflation over a 30-year retirement. The answer isn't at either extreme.
What we actually do
We build around three principles, not three fixed percentages.
Liquidity: Money you can touch today. Living expenses, planned purchases, the unexpected.
The goal isn't return. The goal is that you never have to sell something under pressure.
Protected growth: Bonds, fixed income, and other vehicles built to hold up when equities are
volatile. This is where most of your medium-term spending comes from. It's also what lets you say, when markets drop 20 percent, "I don't have to touch stocks right now." That sentence is worth more than any return projection.
Long-term risk-on assets: Equities and growth investments, meant to compound over
decades. The only reason this works is because the first two exist. When your short-term needs are covered and your medium-term spending is stable, long-term money gets to do what long-term money does: ride out corrections, compound, and grow.
How much goes in each is a function of what's true about your life. Your income sources, your pension, your Social Security, your spending patterns, your timeline, what you want to leave behind. Not a formula.
When the market is down 15 percent and you still want to take the trip to Italy, you take the trip.
The money for it was in liquidity the whole time. It was never at risk in that correction.
Why this matters
Markets will always move. Life will always surprise us. The plan isn't built to avoid either. It's built so you don't have to flinch when they arrive.
This is what we mean when we say planning makes you a better investor. Not because you learn to predict the market, but because you stop needing to react to it. When your portfolio reflects what's actually true about your life, a 15 percent drop stops feeling like a crisis. It starts feeling like part of the plan.
Rules of thumb don't belong in your portfolio. Principles do.
If no one has ever walked you through your plan this way, a short Clarity Visit is a good place to start.
