Glide Path
Quick Definition
The planned change in asset allocation over time, typically shifting from stocks to bonds as you approach or enter retirement.
What Is Glide Path?
A glide path is the predetermined schedule for changing your portfolio's asset allocation over time, usually shifting from aggressive (more stocks) to conservative (more bonds) as you approach retirement.
Standard Glide Path:
| Age | Stocks | Bonds |
|---|---|---|
| 25 | 90% | 10% |
| 35 | 85% | 15% |
| 45 | 75% | 25% |
| 55 | 65% | 35% |
| 65 | 50% | 50% |
| 75+ | 40% | 60% |
Types of Glide Paths:
"To" Retirement:
- Reaches most conservative at retirement date
- Stays flat afterward
- Used by some target-date funds
"Through" Retirement:
- Continues adjusting into retirement
- Becomes more conservative over time
- More common approach
Rising Equity Glide Path:
- Controversial but researched
- Start retirement conservative
- Gradually increase stocks
- Can reduce sequence risk
Glide Path Comparison:
| Approach | At Retirement | Age 85 | Rationale |
|---|---|---|---|
| To | 40/60 | 40/60 | Simplicity |
| Through | 50/50 | 30/70 | Longevity protection |
| Rising | 30/70 | 50/50 | Sequence risk mitigation |
Target-Date Fund Glide Paths:
| Provider | Age 65 Stock % |
|---|---|
| Vanguard | 50% |
| Fidelity | 55% |
| T. Rowe Price | 55% |
| Schwab | 40% |
Building Your Glide Path:
Factors to Consider:
- Risk tolerance
- Other income sources (Social Security, pension)
- Retirement timeline
- Health and longevity expectations
- Spending flexibility
Simple Rule of Thumb: Stock allocation = 120 - your age (or 110 for more conservative)
Customizing Your Glide Path:
- More pension/SS income → Can hold more stocks
- High risk tolerance → Slower equity reduction
- Early retirement → May need more growth longer
Glide Path Example
- 1Vanguard Target Retirement 2030 shifts from 70/30 now to 50/50 at target date
- 2Rising equity glide path: Start retirement at 30% stocks, increase to 60% by age 80
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Related Terms
Asset Allocation
The strategic distribution of an investment portfolio across different asset classes — such as stocks, bonds, and cash — to balance risk and return based on goals and time horizon.
Target-Date Fund
A mutual fund that automatically adjusts its asset allocation from aggressive to conservative as the target retirement date approaches.
Rebalancing
The process of realigning portfolio weights by buying or selling assets to maintain the original desired asset allocation.
Sequence of Returns Risk
The risk that the timing of poor investment returns early in retirement can permanently damage portfolio longevity.
Asset Allocation
The process of dividing investments among different asset classes like stocks, bonds, and cash to balance risk and reward.
Modern Portfolio Theory (MPT)
A framework developed by Harry Markowitz showing how investors can construct portfolios to maximize expected return for a given level of risk.
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