The Retirement Glidepath: An International Perspective

Abstract

All individuals need to decide how much to save during their working years, how much to spend during retirement, and the asset allocation of their portfolio in both periods. A portfolio’s exposure to stocks and bonds affects key variables, such as the probability of portfolio failure, the degree of downside protection, and the expected bequest; how should this exposure evolve during retirement is the ultimate issue explored in this article. After considering declining-equity, rising-equity, and static glidepaths, the comprehensive international evidence from 19 countries and the world market over 110 years considered here ultimately suggests that both an all-equity portfolio and a 60-40 stock-bond allocation are simple and very effective strategies for retirees to implement.

Keywords: Glidepath, retirement, asset allocation

JEL Classification: G11