Asset allocation by age in 2026 still follows a simple pattern in the data: more stocks when the horizon is long, more bonds and cash as the horizon shortens. Vanguard's default target-date glide path holds 90% in stocks at age 25, 50% at age 65, and lands at 30% stocks and 70% bonds around age 72 [1]. The long-run numbers explain why: from 1928 through 2025, the S&P 500 (SPX) compounded at 10.02% a year, 10-year Treasury bonds at 4.53%, and 3-month Treasury bills at 3.37%, but stocks lost money in 26 of those 98 years [2]. As of July 2, 2026, the 10-year Treasury yielded 4.49% and the 3-month bill 3.82%, so the cash and bond side of a portfolio pays more than it did for most of the past 15 years [3] [4].
What the historical record says about stocks, bonds and cash
Aswath Damodaran of NYU Stern maintains a public table of annual returns from 1928 onward. The compound (geometric) annual return for the S&P 500 with dividends was 10.02% over 1928 to 2025, with a standard deviation of annual returns near 19%. The 10-year Treasury bond returned 4.53% a year and the 3-month T-bill 3.37% [2]. Over the more recent 50 years, 1976 to 2025, stocks compounded at 11.93%, bonds at 6.13% and bills at 4.31% [2].
The reward for holding stocks came with deep interruptions. Stocks and bonds both fell in the same calendar year only five times since 1928: 1931, 1941, 1969, 2018 and 2022 [2]. The 2022 episode is the one most investors remember. The S&P 500 lost 18.04% that year and the 10-year Treasury lost 17.83%, while T-bills earned 2.09% [2]. That single year is the main reason cash earned a place back in allocation discussions.
| Asset (1928 to 2025) | Compound annual return | Annual return 2022 | Annual return 2025 |
|---|---|---|---|
| S&P 500 with dividends | 10.02% | -18.04% | 17.78% |
| 10-year Treasury bond | 4.53% | -17.83% | 7.80% |
| 3-month Treasury bill | 3.37% | 2.09% | 4.21% |
Source: NYU Stern historical returns table [2].
How a glide path translates age into an allocation
Target-date funds encode the age rule. Vanguard's glide path starts at 90% stocks for investors in their twenties, begins reducing stock exposure at age 40, adds short-term Treasury Inflation-Protected Securities (TIPS) at age 60, reaches 50% stocks at age 65, and stops at 30% stocks and 70% bonds around age 72 [1]. Investors who want more growth in retirement can freeze the 50% stock weight instead of continuing down the path [1].
Why the curve bends where it does
The logic is time. A 25-year-old has 40 years of contributions ahead, so a 40% drawdown early on hits a small balance and leaves decades for recovery. A 65-year-old is about to start withdrawals, so the same drawdown hits the largest balance the investor will ever have and cannot be repaired with new savings. The historical table shows why the risk is real: the S&P 500 fell 36.55% in 2008 and 21.97% in 2002 [2]. It also shows why stocks remain in the mix at every age. Even the 30% stock landing point exists because 70% in bonds alone has rarely kept pace with inflation over long retirements.
Asset allocation by age when cash yields nearly 4%
The 2026 rate environment changes the cost of caution. As of July 2, 2026, the 3-month Treasury bill yielded 3.82% and the 10-year note 4.49% [4] [3]. The Federal Reserve left policy unchanged at its June meeting, and DataPorium's economic series shows the effective federal funds rate at 3.63% for June 2026, down from 4.33% for most of 2025 [5]. Short-term yields therefore sit a little below the policy rate, while long yields price in inflation that has not yet returned to target.
Real yields matter more than nominal yields for retirees. The Consumer Price Index rose 4.2% in the 12 months to May 2026, with the core index up 2.9% and energy up 23.5% [6]. Against that, a 3.82% bill yield is slightly negative in real terms, while the 4.49% 10-year yield is only modestly positive. Bonds and cash therefore protect against equity drawdowns, but they do not, by themselves, protect purchasing power at today's inflation rate. That is one reason glide paths add TIPS near retirement rather than only nominal bonds [1].
Where the stock market stands
The S&P 500 closed at 7,483.24 on July 2, 2026, up 9.3% from its 2025 year-end close of 6,845.50 [3]. The index fell about 9% between late January and the end of March before recovering, a reminder that even a strong year contains uncomfortable stretches. Investors tracking these moves can follow index and sector data on DataPorium's stock market page.
Practical rules the data supports
- The old "100 minus age" rule gives a 65-year-old 35% in stocks. Vanguard's glide path gives the same investor 50%, partly because retirements now last 25 to 30 years [1].
- Cash covering one to two years of planned withdrawals is now paid to wait: 3.82% on 3-month bills as of July 2, 2026 [4]. In 2021 the same bills yielded close to zero [2].
- Bonds are a diversifier most years but not every year. The 2022 record shows that duration risk is real when inflation surprises to the upside [2].
- Rebalancing back to the age-based target is what makes the glide path work; drift after a strong equity year quietly raises risk.
The counterpoint deserves a hearing. Some researchers argue that a constant high equity weight beats a declining glide path over a full lifetime, because the expected return gap between stocks and bonds is large and long-lived. That argument is strongest for investors with secure pensions or Social Security covering most spending needs. For investors who depend on the portfolio for income, the sequence of returns in the first retirement years dominates, and the glide path is a defensible answer.
The age rule is a rule about time to recover, and the 2026 data changes the price of caution but not the logic.
Key takeaways
- Stocks compounded at 10.02% a year from 1928 to 2025, bonds at 4.53% and bills at 3.37%, but stocks lost money in 26 of 98 years [2].
- Vanguard's glide path runs from 90% stocks at 25 to 50% at 65 and 30% at 72, adding TIPS from age 60 [1].
- As of July 2, 2026, 3-month bills paid 3.82% and the 10-year Treasury 4.49%, while CPI inflation was 4.2% in the year to May [4] [3] [6].
- The effective federal funds rate was 3.63% in June 2026, down from 4.33% through most of 2025, so cash yields have already come down from their peak [5].
- Cash and bonds cushion drawdowns but do not guarantee real returns; inflation protection has to be planned separately.
Frequently asked questions
What is a good asset allocation by age in 2026?
A common reference point is Vanguard's target-date glide path: about 90% stocks in your twenties and thirties, sliding to 50% stocks at 65 and 30% stocks after age 72 [1]. Investors with pensions or other guaranteed income may consider holding more stocks than the default.
Should retirees hold more cash now that Treasury bills yield almost 4%?
Cash covering one to two years of withdrawals is cheaper to hold than it was when bills yielded near zero; 3-month bills yielded 3.82% as of July 2, 2026 [4]. Beyond that reserve, cash still lags inflation, which was 4.2% in the year to May 2026 [6].
Do bonds always reduce portfolio risk?
Not always. Stocks and bonds both fell in 2022, when the S&P 500 lost 18.04% and the 10-year Treasury lost 17.83% [2]. Bonds have diversified stocks in most years since 1928, but not when inflation rises quickly.
How much do stocks return over the long run?
From 1928 through 2025 the S&P 500 including dividends compounded at 10.02% a year, and from 1976 through 2025 at 11.93% a year [2]. Those averages include years such as 2008 (down 36.55%) and 2022 (down 18.04%).
Sources & References
- [1] Vanguard: Target-date fund glide path
- [2] NYU Stern (Damodaran): Historical Returns on Stocks, Bonds and Bills, 1928 to 2025
- [3] FRED: Market Yield on U.S. Treasury Securities at 10-Year Constant Maturity (DGS10)
- [4] FRED: Market Yield on U.S. Treasury Securities at 3-Month Constant Maturity (DGS3MO)
- [5] DataPorium Economic Metrics
- [6] BLS: Consumer Price Index, May 2026
