J.P. Morgan Asset Management’s 2025 Guide to Retirement includes a chart illustrating how investors describe their investment risk tolerance at different ages, scaled from 1 to 5.
- Conservative
- Moderately Conservative
- Moderate
- Moderately Aggressive
- Aggressive
Those at a 1 were mostly in bonds, whereas those at a 5 were most likely 100% in stocks. The numbers were paired with age, and the data showed that overall risk tolerance seems to peak around age 55. From that point, folks begin sliding from aggressive (4s and 5s) into more conservative camps.
While that might be expected, a more surprising revelation was that investors in their 30s tend to have a slightly greater propensity for conservative behavior (1s) than folks in their 40s and early 50s, where risk tolerance seems to increase. Predictably, people in their 60s, 70s, and 80s shifted towards a more conservative stance.
Why did a higher-than-expected percentage of the younger cohort lean into conservative investments despite having larger time horizons? There are numerous possible causes, some of which are suggested by JP Morgan. With that age group having experienced the 2008 financial crisis during their formative years, they may be more prone to emotional risk aversion. A 2018 Federal Reserve study on millennials found that dealing with such financial obstacles “has negatively impacted their attitude towards financial risk-taking, including investing and even opening up a new credit card.” The Fed went so far as to say that a 2017 survey found that millennials were more afraid of credit card debt than of dying or war.
Another reason could be a lack of experience, leading to the discounting of long-term compounding’s critical role and an overblown fear of risk in the stock market. Individuals without proper guidance may default to cash- or bond-heavy portfolios, missing out on potential growth opportunities. Furthermore, thirty-somethings often have student loans, home purchases, and family planning expenses, but little to no wiggle room after the bills have been paid. This can make them oversensitive to negative market returns.
As they age, investors can become more educated about how best to navigate their situation, and that often means shifting toward a more aggressive stance until nearing retirement, when the mindset naturally shifts from aggressive investments to a more balanced, conservative portfolio.
An investor’s comfort with market volatility isn’t fixed, and it’s perfectly natural to calculate and tweak the amount of risk as one moves through different phases of life. But how exactly should an investment strategy adapt as risk tolerance evolves?
Risk Tolerance And Age: Emotions And Investing
There is no one-size-fits-all strategy based purely on age. Still, by utilizing market research, essential financial planning guidelines, and behavioral finance, some general allocation ranges begin to emerge.
Early Career (20s-40s): Embrace Growth (90%-Plus In Stocks)
Although it may seem counterintuitive, dips, corrections, and bear markets can be helpful during this time. Individuals adding money to their investments each year are, hopefully, buying through these pullbacks. This creates a dynamic of investing money regularly over time, regardless of market fluctuations, which smooths out the average entry price and helps avoid the urge to time the market, also known as dollar-cost averaging.
Time is this cadre’s greatest asset. Thus, the most effective goal is typically to stay invested so the money can grow. Sticking to equities such as broad market index funds and growth stocks, combined with consistent contributions, is customarily more effective than market timing.
Mid-Career (40s-60): Balance Growth With Stability (70/30 Stocks-To-Bonds Ratio)
This contingent may be more focused on balance. Growth still plays a role, but adding some stability as retirement nears is a productive strategy in many cases. It may take the form of a portfolio with 70% allocated to stocks and 30% allocated to bonds, with regular rebalancing for alignment. Gradually, these individuals would typically be well-served by adding dry powder safety assets such as more bonds or dividend-paying stocks. Equities will continue to be emphasized, but with a gentle shift toward income-producing investments.
Nearing Retirement (60s): Shift Toward Stability (60/40 Stocks-To-Bonds)
This demographic is close to no longer earning a paycheck, so the time to take stability seriously is now. That can look like transitioning to a balanced portfolio, with approximately 60% in stocks and 40% in bonds. The priority becomes an attempt to acquire reliable, income-producing assets—such as bonds, dividend-paying stocks, and cash—to generate a steady cash flow once retirement arrives.
Retirement (70s-Plus): Stability And Income (50/50 Stocks-To-Bonds)
Obviously, this segment needs to protect what it has saved, but it can be helpful to avoid overly defensive strategies. Maintaining portfolio growth remains crucial for most retirees.
A widely used ratio is approximately 50% in equities and 50% in stable investments, such as bonds and cash. It can be beneficial to prioritize investments that pay consistent dividends or bond interest, which may result in steady income. It’s worth reminding these folks of the 4% Rule of thumb: to safely maximize withdrawals without depleting funds, at least half the portfolio typically needs to be held in stocks.
An even more straightforward tactic for an investor to calculate a typically productive stock percentage is to subtract their age from 120. So, a 40-year-old would aim for 80% in stocks (120-40=80), whereas a 60-year-old might be hoping for something closer to 60% (120-60=60). Again, there is no perfect strategy, but for some, this is an easy and intuitive method of gradually shifting their portfolio toward stability as they age, without overthinking the process.
Bottom Line
Comfort zones naturally evolve as investors age, realigning from a concentration on growth to one on stability and income. By thoughtfully recalibrating the stock-to-bond mix over time—whether by following a precise rule of thumb such as 120 minus age, or simply striving for productive outcomes in each time horizon—investors hope to enjoy less anxiety and more financial freedom, making the journey to and through retirement happier and smoother, and leaving more time and opportunity for finding passion, peace, and purpose.
The information provided here is for general informational purposes only and should not be considered an individualized recommendation or personalized investment advice. The investment strategies mentioned here may not be suitable for everyone. Each investor needs to review an investment strategy for his or her own particular situation before making any investment decision. Investing involves risk, including the possible loss of principal. Stock prices fluctuate, sometimes rapidly and dramatically, due to factors affecting individual companies, particular industries or sectors, or general market conditions. For stocks paying dividends, dividends are not guaranteed, and can increase, decrease or be totally eliminated without notice. Fixed-income securities involve interest rate, credit, inflation, and reinvestment risks; and possible loss of principal. Diversification can reduce (but not eliminate) the risk of loss. All expressions of opinion are subject to change without notice in reaction to shifting market conditions.
Read the full article here
