Glide Path
Automatic asset allocation shift in target-date funds from aggressive (stocks) to conservative (bonds) as retirement approaches. "Set and forget" strategy.
What You Need to Know
Glide path is the predetermined schedule that target-date funds use to shift from stocks to bonds as you age. The fund automatically becomes more conservative over time without any action required.
Typical glide path example:
- Age 25 (40 years to retirement): 90% stocks, 10% bonds
- Age 45 (20 years to retirement): 75% stocks, 25% bonds
- Age 65 (retirement): 40% stocks, 60% bonds
- Age 75 (10 years in retirement): 30% stocks, 70% bonds
Two glide path types:
- "To retirement": Most aggressive allocation at retirement year
- "Through retirement": Continues becoming more conservative 10-20 years past retirement
Glide path controversy: Some argue remaining too conservative (60% bonds at retirement) leaves retirees with insufficient growth for 30-year retirement. Others say it's necessary safety.
Evaluate your target-date fund's glide path. Too conservative = might outlive money due to inflation. Too aggressive = vulnerable to bear market right before retirement.
Sources & References
This information is sourced from authoritative government and academic institutions:
- investor.gov
https://www.investor.gov/introduction-investing/investing-basics/investment-products/target-date-funds
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Put your knowledge into action with these interactive tools:
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