Risk Tolerance Isn't Personality — It's Life Stage

Risk capacity vs risk tolerance

Risk capacity is your objective ability to absorb a loss without derailing your plan. Risk tolerance is your subjective comfort with volatility. The mistake most people make is letting tolerance set allocation when capacity should set it.

A 32-year-old with 35 years of human capital ahead of them has nearly unlimited risk capacity, regardless of how a 30% drawdown would feel. A 62-year-old retiring next year has very little capacity, even if they say 'I can handle volatility.'

• Long horizon + stable income = high risk capacity
• Near-retirement window = sequence-of-returns vulnerability
• Build the 'bond tent' 5–10 years before retiring, not the day after

Glide paths: not just for target-date funds

A glide path is just a plan for how your allocation shifts over time. Even DIY investors should have one — written down, automatic, and de-risked through the high-vulnerability window into and through early retirement.

When tolerance does matter

When it would cause you to panic-sell. The 'best' allocation on paper is worthless if you'd capitulate at the bottom. Pick one you'd hold through a 50% drawdown — that's your real allocation.

How PeakWorth models risk by life stage

Each glide path is run against your real plan and reported as a change in your FI Age (the year your portfolio reaches ~25× the expenses it must cover after Social Security — roughly 20× your total annual expenses) and the sustainability of your PeakWorth (highest projected lifetime net worth), so the right allocation for your life stage is a modeled outcome — not a gut-feel personality quiz.