Journal of Retirement, vol. 1, no. 2, Fall 2013, pp. 13-28.
Posted: 18 Sep 2013 Last revised: 30 Dec 2016
Date Written: June 30, 2013
Target-date investment strategies purport to meet the two primary objectives of any retirement savings program: maximizing the real value of investors’ nest eggs while minimizing uncertainty around prospective income in retirement. The authors demonstrate that the classic glidepath approach to retirement investing — moving from equity-centric to bond-centric investing as we age — does not meet these objectives.
The authors summarize the flaws in traditional glidepath implementation and explore illustrative changes to the rules-based, mechanistic solution for retirement planning that can improve the expected outcome for investors, using simulations to test alternatives. Their findings show that, even with simple rules-based approaches, there are better ways to achieve our financial objectives for retirement.
Keywords: Target Date Fund, Glidepath, Retirement Investing, Asset Allocation, Alternative Assets
Suggested Citation: Suggested Citation
Arnott, Robert D. and Sherrerd, Katrina F. and Wu, Lillian J., The Glidepath Illusion...And Potential Solutions (June 30, 2013). Journal of Retirement, vol. 1, no. 2, Fall 2013, pp. 13-28.. Available at SSRN: https://ssrn.com/abstract=2326774
By Andrew Ang