Allocation in Retirement: A Flat Glide Path Always Make Sense
by Josh Cohen
You’ve probably heard about Ali versus Frazier and Coke versus Pepsi. But have you heard about the next great debate—in the defined-contribution industry—known as “to” versus “through”?
This debate centers on what type of glide path (evolving mix of stocks and bonds) should be designed once a target date fund reaches the target year of an individual’s retirement.
The investment industry has characterized the “to” camp as proponents of the idea that target date funds should be designed primarily to build savings up to an individual’s target retirement date. Target date funds exemplifying the “to” principle have more conservative allocations to stocks (or other risky assets) at an individual’s target retirement date, typically with a flat or static allocation during later retirement years.
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