The Only Investing Rule You Will Ever Need

0:00Stop investing based on your age alone. Start investing based on when you need the money. Your timeline is your allocation. Hello, friends. This is Tyler Gardner welcoming you to another episode of Your Money Guide on the Side, where it is my job to simplify what seems complex, add nuance to what seems simple, and learn from and alongside some of the brightest minds in money, finance, and investing. So let's get started and get you one step closer to where you need to be. All right, welcome back. A few months ago, we released an episode called The Real Financial Order of Operations, where I walked you through the mathematically optimal sequence for deploying every dollar you save.

0:49We started with putting on our own oxygen mask, then we got the employer match, then we paid off high interest debt, then you got term and disability insurance, then Roth IRA, then HSA, etc, etc. Not going to lie, it was and continues to be a useful episode for you to use as a guideline, regardless of whether you follow it step by step. And apparently, you all liked that episode and it struck a nerve. Because that episode became one of our most downloaded of 2025. I got tons of emails, and most importantly, a bunch of you actually left reviews on Apple and Spotify saying it helped you finally understand where your money should go.

1:31So here's my familiar ask. If this episode ends up being just as helpful, Please consider doing me one favor and leaving a review on Apple Podcasts or Spotify. Write one sentence about what you learned or what you're thinking more about and then come back. It helps more people find the show, and it's the only way I know whether these deep dive episodes are actually useful or if I'm continuing to shout into the void while my hounds judge me from the couch. Okay, now that you're back, thank you, and let's get into it. So, here's what happened after the first Order of Operations episode. I got about 100 emails, I'm rounding but not by much, that all asked some version of the same question.

2:17Tyler, I'm 60 years old, how should I be investing? Tyler, I'm 72 and just retired, what should my portfolio look like? Tyler, I'm 45 and want to retire early. Should I be more aggressive or conservative at my age? And every single time I read one of these emails, I wanted to respond with, you're asking the wrong question. Not because the question of what to invest in doesn't matter. It does, obviously. Not because I don't want to help. I do, obviously. But the question itself is built on a flawed assumption that's been drilled into our heads by every financial magazine, robo-advisor, and well-meaning but outdated CFP since about the 80s.

3:09The assumption is this. Your age should determine how you invest. You've heard it a million times. Subtract your age from 110 to get your stock allocation, or the slightly more aggressive version, 120 or 130 minus your age. Or if you're talking to someone who really wants to sound sophisticated, use a target date fund based on your expected retirement year. And look, I get it. That's simple. It's easy to remember. It gives you a number. And when you're staring at a blank brokerage account wondering what the hell to do, simple feels like a lifeline. But here's the problem. Age-based investing is lazy thinking disguised as wisdom.

3:55Because your age tells me almost nothing about how you should invest. What I actually need to know is, when do you need the money? That's it. That's the question you should be asking, that's the framework. Not how old you are, not how aggressive you feel, not whether Mercury is in retrograde or whether you're a Scorpio who prefers growth stocks. When do you need the money? Today's episode is about burning down the age-based investing model and replacing it with something that actually works, a timeline-based system that matches your allocation to when you'll spend the money, not how many birthdays you've had.

4:43We're going deep on the three-bucket system that I introduce in my book that's coming out in December 2026. More on that later. We're going to walk through real examples of people at the exact same age who should be invested completely differently. We're going to cover the specific funds and allocations you should use at each level. And we're going to define the 10 terms you actually need to know so you can stop feeling like investing is some secret language only finance bros understand. So consider this part two of the real order of operations. And if part one told you where to put your money, part two is going to tell you how to invest it once it gets there.

5:26Let's go. All right, let's start with why. How should a 60 year old invest is the wrong question. Here are two people. Both are 60 years old. Both have about$2 million saved. Both are in good health. Both live in the same city, have similar expenses, and just to make this really tidy, both drive Subarus, because why not? Person A, retired last year, sold the business, has a pension that covers 80 % of living expenses. Social Security kicks in at 67 and will cover the rest. So the$2 million, that's legacy money earmarked for grandkids' college funds and maybe a cabin in Montana. Person B, still working, hates the job, no pension, no inheritance coming, plans to retire in two years and will need to live off that$2 million for the next 30-plus years.

6:25Now, here's the question. Should person A and person B invest the same way? If you're using the age-based model, the answer is, yeah, they'll be invested the same. They're both 60. Subtract 60 from 110. You get 50 % stocks, 50 % bonds, lock it in, call it a day. Investor B and A are both in good shape. But that's insane. Person A doesn't need that$2 million for 15 plus years. They should be 100 % in stocks, aggressive, growth-oriented, compounding like crazy, because they've got some time. A market crash in year two? Who cares? They're not touching the money until year 15. But person B needs that$2 million starting in two years.

7:17They should be moving aggressively towards bonds and cash right now. Because if the market drops 40 % in year one and they're forced to start selling shares at depressed prices in year two, they're cooked. That's called sequence of returns risk, and it can be a retirement killer. Same age, completely different allocations. And the age-based model can't tell the difference. Let's give you another example. Person C, 30 years old, saving for a house down payment in 18 months, has$40 ,000 set aside. Person D, 70 years old, fully retired, living comfortably off Social Security and a pension, has$40 ,000 in a brokerage account earmarked for a dream trip to New Zealand in 10 years.

8:07Who should be more aggressive? If you said person C because they're younger, congratulations. You just lost them$12 ,000 when the market dropped right before they needed to buy the house, and now they have a condo. The right answer is person D. They have a decade. Person C has 18 months. Person C should be in cash or short-term bonds. Person D, given the 10-year time frame, should be 100 % in stocks. Are you seeing the trend here? Age doesn't matter. What matters is when do you need the money? And once you start asking that question, once you stop thinking in terms of I'm X years old, so I should be Y percent in stocks, and start thinking in terms of I need X amount of money in Y years, so here's how I should invest it, everything actually gets even more simple.

9:05You're not guessing. You're not following some arbitrary rule. You are just matching your timeline to your allocation strategy, which brings us to the system. And I will call it the three bucket system. Because let's be honest, there aren't many synonyms for bucket. And I couldn't call myself a personal finance influencer if I didn't at some point introduce a bucket system. Here's the framework that replaces all the age-based nonsense, and it's crazy simple. Bucket 1, money you're going to need in 0 to 2 years. Bucket 2, money you're not going to need for 2 to 10 years. Bucket 3, money you don't need for 10 plus years.

9:55That's it. Every dollar you have goes into one of these three buckets based on when you'll spend it. And each bucket has a different investment strategy because each bucket has a different timeline. Let's break them down one by one. This week's episode is brought to you by Fabric. Let's talk about the financial task that lives permanently on everyone's to-do list right next to clean out the garage and actually read that user agreement before clicking accept. Term life insurance. I get it. Nobody's sitting around Saturday morning with their coffee going, you know what sounds great right now? Contemplating my own mortality.

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12:14Bucket one, the I need this soon fund zero to two years. This is money you might need right now or very soon. You might call it an emergency fund or it's for a car down payment next year, a kitchen renovation in 18 months, a wedding in six months, anything you know you'll spend money on within two years. How to invest it? 100 % in safe, liquid, boring stuff. High yield savings accounts, money market funds, short-term treasury bonds. If you're absolutely sure you won't need the money before maturity, but watch those early withdrawal penalties. CDs are fine. Specific funds or accounts. If you're looking for high high-yield savings.

13:03Ally, Marcus, Wealthfront, any of these are fine. There's not one that's better than another. Money market funds. Vanguard's VMMXX. Fidelity's SPAXX. Schwab's SWVXX. Or you can get short-term treasuries and buy them directly through treasurydirect.gov. The important thing here, zero stock exposure. None. If you need this money in the next two years, you cannot afford to watch it drop 30 % right when you need it. This isn't about being conservative. This isn't about your age. This is about basic probability. The stock market is too volatile for short timelines, full stop. Example, you're 50 years old and planning to buy a house in 14 months.

13:55That down payment money, it's bucket one. High yield savings, done. Bucket two, the I know exactly what this is for fund, two to 10 years. This is money earmarked for specific medium term goals. Down payment on a house in four years. Starting a business and need some cash on the side in six. Sabbatical fund, that trip to Antarctica, a rental property purchase in eight years. You know you're going to spend this money. You know roughly when, and because you have a specific timeline, you can use that exact timeline to determine your allocation. How to invest it? This is where the magic happens. Ready for the simplest investment formula you'll ever use.

14:44Years until you need the money equals percentage in stocks. That's the formula. 10 years out, 100 % stocks. 8 years out, 80 % stocks, 20 % bonds or cash. 6 years out, 60 % stocks, 40 % bonds or cash. 3 years out, 30 % stocks, 70 % bonds or cash. And when we get to two years out, we start moving to bucket one to hopefully be closer to 100 % bonds and cash. Why this glide path? Because at 10 years, you have enough time, historically speaking, to ride out a market crash. The market has recovered from every major downturn within a decade. At three years, you don't have that luxury. The specific funds you can use.

15:35Let's keep it equally simple. For stocks, you can use VTI, Vanguard's total stock market, FSKAX, Fidelity's total stock market, or SWTSX, Schwab's total stock market. For the bond allocation, BND, Vanguard's total bond market, FXNAX, Fidelity's total bond market, or SWAGX, Schwab's total bond market. They're all the same. Example, you're 35 years old, saving for a house in five years. Your allocation right now should have nothing to do with being 35. It should be 50 % stocks in VTI, 50 % bonds in BND. Next year, when you're four years out, you shift to 40 % stocks, 60 % bonds. The year after that, 30-70.

16:31You're de-risking as you approach the goal, just like target date retirement funds and 529s, except this has nothing to do with age. Another example, you're 68 years old, retired, living comfortably off a pension. You have$100 ,000 earmarked for a big family reunion trip in seven years. Your allocation, you guessed it, 70 % stocks, 30 % bonds. Because you've got seven years, your age is irrelevant. This is the part people get wrong all the time. They look at the 68-year-old and think, but they're almost 70. They should be so conservative. No, the money has a seven-year timeline. The money should be invested accordingly.

17:16Bucket three, the future me fund for 10 plus years out. This is money you're not going to need for at least a decade, probably much longer. Retirement, coast fire, financial independence, legacy planning, long-term wealth building. How to invest it? Aggressively. 100 % stocks in low-cost index funds. This is where real compounding happens, and you can afford to ride out every market crash because you're not touching this money for years. Once again, specific funds, we're just going to go with total market funds here. Vanguard's VTI, Fidelity's FSKAX, Schwab's SWTSX, or if you want to add a little international diversification just for fun, do 70 % VTI and 30 % VXUS, Vanguard's total international stock ETF.

18:13The critical rule, when you get within 10 years of needing a certain amount of money, that portion migrates to bucket two and starts the glide path to safety. If you're planning to retire in 11 years and you know you're going to need X amount of money, you start moving that money from 100 % stocks into bucket two's allocation. That does not mean move your entire retirement fund into bucket two's allocation because you're not going to need your entire retirement fund when you retire. Another massive myth in financial planning. Just because we are retired doesn't mean we're taking out our entire net worth and spending it all on candy.

18:57Another example, if you're planning to buy a rental property in 12 years, that portion can stay in bucket three for now, 100 % stocks. Or let's say you're 25 years old, investing for retirement at 65. That's 40 years away. Bucket three, 100 % stocks, let it ride. You should not be glide pathing into bonds just because you're getting closer to 65. Yet another example, you're 70 years old with$500 ,000 earmarked for your grandkids college funds. The oldest grandkid is five. So you won't need the money for 13 plus years. Again, bucket three, 100 % stocks, VTI or VTI plus VXUS. Same bucket, different ages, same allocation.

19:44Let's make this concrete with some real nuanced scenarios. I'm going to give you four people at four different ages, and I want you to see how the three-bucket system can work in practice. This week's episode is brought to you by Facet. Here's something nobody tells you. The three years before you retire might matter more than the 30 years you spent saving for it. There are decisions sitting in that window that can either save you tens of thousands of dollars or cost you that much if you get them wrong. First, Medicare and something called IRMA. Your premiums aren't based on what you make when you retire.

20:23They're based on what you made two years prior. Big income year, sold a business, took a large bonus. Medicare finds out. We're talking your Part B premium jumping from around$200 a month to nearly$700. That's$6 ,000 extra per year because of a look-back window most people don't even know exists. Second, Roth conversions. Your early 60s are often the lowest tax period of your entire adult life, the perfect window to move IRA dollars into a Roth at a discount. But convert too aggressively, and you spike your income, trigger IRMA, and get pushed into a higher bracket. Convert too little, and you miss the window entirely, then get walloped by required minimum distributions at 73.

21:07Third, social security timing. Take it at 62 for a guaranteed income floor or delay to 70 for 8 % annual increases and a larger survivor benefit. Get this one wrong and you're living with the consequences for the rest of your life, literally. Most high earners leave serious money on the table, not because they're bad with money, but because they're reacting to life instead of planning ahead for it. So go to facet.com slash Tyler today and begin to plan strategically. Facet's team of dedicated CFP professionals will build you an actual roadmap for one flat annual membership fee, not a percentage of your assets.

21:49That's facet.com slash Tyler. Facet is an SEC registered investment advisor. This is not advice. All opinions are my own and not a guarantee of a similar outcome. I'm not a member of FACET. I have an incentive to endorse FACET as I have an ongoing fee-based contract for cash compensation, as well as a percentage of equity in FACET based on this endorsement. Scenario one, we have Sarah, age 28 years old. Congrats, Sarah just got engaged. Wedding is in 18 months and she has$25 ,000 saved for it. age-based advice would say she's 28, so she should be aggressive 80 to 90 % stocks. Timeline-based advice, wedding in 18 months equals, that's right, bucket one, 100 % cash.

22:43High-yield savings account, she cannot afford to watch that$25 ,000 drop to$17 ,500 six months before the wedding unless she wants to say goodbye to her dream venue. Allocation, 100 % high-yield savings account, or money market fund that we already discussed above. Scenario two, Marcus, age of 45. Marcus has$400 ,000 in his 401k, but he plans to work until 65, another 20 years. He's also saving$50 ,000 for a down payment on a rental property he wants to buy in six years. Age-based advice, you're 45, and even aggressively speaking, 120 minus 45 would have him at 75 % stocks, 25 % bonds for his 401k.

23:34Timeline-based advice, the 400 ,000 retirement money, that's bucket three, 20 years away, 100 % stocks. But the 50 ,000 rental property fund, that's bucket two, six years away, so 60 % stocks, 40 % bonds. Allocation. For the 401k, 100 % VTI. For the rental fund, taxable brokerage, 60 % VTI, 40 % BND. Scenario three. Linda, age 62. Linda just retired. She has$1.5 million saved. No pension, but Social Security starts at 67 and will cover about 40 % of her expenses. She needs to start drawing from her portfolio now to cover the gap. Age-based advice. You're 62, you're retiring, be conservative, 50 % stocks, 50 % bonds.

24:35Timeline-based advice. Well, this is tricky. Linda needs money right now, but she also needs this portfolio to last 30 plus years. So we split it. Bucket one, the next two years of expenses, is going to be about$100 ,000 in cash or money market that will cover her immediate needs. Bucket two, years three to 10, is about$400 ,000 can be in a glide path allocation, getting more conservative as she approaches each year. But, and this is where age-based advice just doesn't get to it. Bucket 3, 10 years out, should still be about a million dollars in 100 % stocks, because she won't touch that million for a decade plus.

25:24Allocation, for the 100k in bucket 1, a money market like VMMXX. For the 400k that she'll need over the next 3-10 years, let's just average and say she needs it in 5, 50 % VTI, 50 % BND. But for that million that she probably won't touch for at least a decade, 100 % VTI. As Linda spends down bucket one each year, she can replenish it by moving money from bucket two. As bucket two gets closer to being spent, she shifts allocation towards bonds. Bucket three stays aggressive and compounds. This is called my bucket withdrawal strategy and is how you avoid selling stocks in a crash while still maintaining growth.

26:12One more scenario, Robert, age 73. Robert is fully retired. He has a generous pension that covers 100 % of his living expenses. He has$800 ,000 in a brokerage account that he's planning to leave to his kids. He doesn't need it at all. Age-based advice. You're 73, you should be super conservative, maybe 30 % stocks, 70 % bonds. Timeline-based advice, Robert doesn't need this money for at least 15 to 20 years or ever. Bucket three, 100 % stocks. Allocation, 100 % VTI. Let it grow, leave it to the kids, they'll inherit it with a stepped-up cost basis and pay zero capital gains tax. Do you see the pattern?

27:02Age tells us nothing. Timeline has been telling us everything. We've just been ignoring it. Okay. Before we wrap up today, I do want to make sure you understand the language because the financial industry has spent decades making the sound more complicated than it ever has to be. Here are 10 terms that matter. And for the 2.0 listener, you might skip ahead, but this is something that I feel is crucial to at least have you understand not only that timeline investing is critical, but also there are a few simple terms that can keep you feeling completely confident and empowered to manage your own money.

27:42Number one, stock. It's a share of ownership in a company. When you buy Apple stock, you own a tiny piece of Apple. Stocks grow when companies grow. They're volatile in the short term, but historically return about 7 % annually in real terms. Number two, bond. A loan you give to a company or government. They pay you interest and eventually return your principal. Bonds are safer than stocks, but grow more slowly, usually return about 2 % to 4 % in real terms. Number three, index fund. A fund that owns hundreds or thousands of companies at once, tracking a specific index like the S &P 500 or the total stock market.

28:30It's instant diversification, so you don't over concentrate on one or two businesses, and they're offered for exceptionally low fees. Examples we've already gone over, VTI, FSKAX, SWTSX. Number four, an ETF. Just like an index fund, this is called an exchange-traded fund, and it trades on the stock market like a stock. It's the same thing for our purposes, just slightly different structure. Examples would be VOO, VTI, and BND. Number five, this is one I always want to remind you of. Expense ratio is just the fancy word for fee. The annual fee that the fund charges you expressed as a percentage.

29:150.03 % is great, and that's what most of the funds that I talk about cost, 1 % is highway robbery, and you should never invest in a fund that is charging you 1%, and odds are you won't. Example, VTI charges 0.03%. So on a$10 ,000 investment, that's$3 a year, whereas a 1 % actively managed fund would charge $100 a year. And over 30 years, that difference compounds into tens of thousands of dollars. So before you invest in anything, Google the ticker symbol like VOO or VTI plus expense ratio, and you're looking for anything under 0.1 % is usually pretty darn fair. Number six, asset allocation. It's what we've been talking about.

30:00It's just the mix of different asset classes. In this episode, we just talked about the mix of stocks and bonds in your portfolio. 60-40 just means 60 % stocks, 40 % bonds, and we use asset allocation to try to mitigate the downside by having our portfolio consist of non or negatively correlated asset classes, and that can be a good thing. Number seven, one term we talked about today was the glide path. This is just a strategy of shifting from risk on stocks to risk off bonds or vice versa as you approach a goal. Think of it like landing a plane. You start high, then gradually descend as you approach the runway, your goal.

30:45Number eight, real return. You hear me say this a lot. It just means your return after adjusting for inflation. If your investment earned 10 % and inflation was 3%, your real return is 7%. That's what actually matters for purchasing power. Number nine, capital gains tax. This is just the tax you pay when you sell an investment for a profit. If you hold it for more than a year, it's called a long-term cap gains tax, and it's taxed at 0, 15, or 20 % depending on your income, way better than ordinary income tax. It encourages us to buy and hold investments. And finally, number 10, we didn't get into quite as much in this episode, but the RMD or the required minimum distribution is what the IRS forces you to start taking out of your traditional IRA or 401k after your 73rd birthday.

31:40Roth IRAs have no RMDs, taxable brokerage accounts have no RMDs ever. That's it. 10 terms. Master those and you can navigate 99 % of investing decisions without needing to hire anyone. If you take nothing else from this episode, please take this. Stop investing based on your age alone. Start investing based on when you need the money. Your timeline is your allocation. You don't even need to think about risk tolerance because the beauty of this system is that it takes care of the risk tolerance for you that's the system zero to two years bucket one cash high yield savings money market funds short-term bonds two to ten years bucket two glide path years until goal equals percent in stocks 10 plus years, bucket 3, aggressive 100 % stocks.