The Glidepath Illusion...And Potential Solutions
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
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