Portfolio Size and Asset Allocation by Age

by Michael on Sep 20, 2013 · 1 comment

Image of Asset Allocation Analysis

In case you missed it, Vanguard recently released data looking average portfolio size and stock allocation as a function of age.

It’s an imperfect analysis in that it focuses on retirement plan participants at Vanguard. Thus, it’s a non-random sample and limited to defined contribution plan holdings. But still…

Those quibbles notwithstanding, the data are rather interesting.

Average portfolio size

For starters, let’s take a look at average plan balances broken down by age.

Age Range Average Balance
Under 25 $3,865
25-34 $21,524
35-44 $54,054
45-54 $103,269
55-64 $154,421
65+ $176,696

As expected, portfolio size tends to increase with age, bottoming out at a little under $4k for those 25 and under, and topping out at better than $176k for those 65 and older. Any thoughts on this?

Honestly, these values seem quite low. Keep in mind, however, that defined contribution plans are just one piece of the investing puzzle. Presumably, many of these individuals have IRAs, pensions, and/or taxable holdings to round things out.

Average portfolio allocation

What about asset allocation? What follows is a breakdown of the percentage held in stocks as a function of age.

Age Range % in Stocks
Under 25 84%
25-34 80%
35-44 78%
45-54 71%
55-64 59%
65+ 48%

Once again, the expected trend emerges. People tend to grow more conservative as they approach retirement age.

As for us, my wife and I are currently in the upper half of the 35-44 age group, where the average investors has 78% invested in stocks. And yet we have just 60% in stocks with the remaining 40% in bonds.

Of course, we don’t have a huge need to take risk thanks to some good fortune on the small business front. Thus, we’re perfectly comfortable ratcheting back our risk profile while others might not.

Actually, it’s kind of interesting…

If you look at that same age group, you might expect them to be holding something akin to the Target Retirement 2040 or 2035 portfolio, which are both more aggressive than the real-world averages. Indeed, the TR 2044 portfolio currently has just shy of 90% in stocks whereas the TR 2035 portfolio has roughly 85% in stocks.

At the upper end of the age scale, however, the situation flips. Real-world retirees are more aggressive than the corresponding Target Retirement portfolios, with those 65+ holding 48% in stocks vs. 40% and 30% for TR 2010 and TR Income, respectively.

Source: The Vanguard Group

1 thepotatohead October 1, 2013 at 11:13 pm

Most of my money is currently in my 401k and not in a separate brokerage account. In talks with most of my co workers they are definitely not making reitrement and investments a priority, so the low numbers don’t really surprise me at all

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