Life-Cycle (Glide Path) Asset Allocation
Just as a plane gradually lowers its altitude when landing, what if you gradually lowered your weight in risky stocks as retirement approaches? This 'landing path' is exactly the glide path.
What is a glide path
A glide path is a predefined asset-allocation path that reduces the stock weight and increases the bond weight as you age. It's originally an aviation term meaning 'gliding path,' taken from the way a plane gradually lowers its altitude toward the landing point.
When young, your investment horizon is long, so you have enough time to recover even from a crash—so you hold plenty of stocks; as retirement nears, you must protect the money you've saved—so you increase stable assets like bonds. The product that automatically executes this logic is the target-date fund (TDF). The number in a name like 'TDF 2050' is the target retirement year, and the weights change on their own toward that year.
A glide path is not a formula that guarantees future returns but a 'framework for managing risk according to age.' No path can block a market decline itself.
The simplest version: the '100 - age' rule
The simplest form of a glide path is the '100 - age' rule. It's a rule to put in stocks as much as the number obtained by subtracting your age from 100. For example, at age 40, 100-40=60, that is, 60% stocks / 40% bonds.
But these days, as lifespans have lengthened, many point out this rule is too conservative. Even if you retire at 65, you may live another 25–30 years, so holding only a pile of bonds can make your money run out first. So versions that raise the base number, like '110 - age' or '120 - age,' are also used. On an age-30 basis, the 110 rule gives 80% stocks, and the 120 rule gives 90% stocks.
These rules are, after all, only rough starting points. In practice you must adjust for income, goals, and risk tolerance.
How does an actual TDF move
As a representative example, looking at Vanguard's target retirement fund glide path, it keeps the stock weight high at about 90% in the early-career period (roughly age 25), then lowers it a bit each year as retirement nears, reaching about 30% stocks / 70% bonds around age 72, after which it maintains that ratio.
An important concept here is the 'To' method versus the 'Through' method. 'To' reaches the most conservative allocation at the retirement point and stops there, while 'Through' keeps reducing stocks even after retirement. Even for the same 'TDF 2050,' this method differs by manager, so the stock weight at the retirement point can differ by as much as roughly 40–55%.
The figures written here (90%→30%, age 72, etc.) are a specific manager's rough path and vary by product and timing. TDFs carry management fees, so even though they look low, they affect returns over the long run.
The lesson of 2008: 'automatic' doesn't mean safe
The event that showed a glide path isn't all-powerful is the 2008 financial crisis. At the time, 'target 2010' TDFs for people right on the verge of retirement took big losses, and the loss magnitude differed greatly by fund, from roughly -9% to -41%.
Why such a difference? Because even though they all claimed 'retire in 2010,' the stock weight varied wildly by manager. Some 2010 funds had stocks around 26%, while others had over 70%. One fund holding a lot of stocks recorded about -41% in 2008 alone, and subscribers one year from retirement took a big hit, becoming subjects of investigation by the U.S. SEC and Congress.
The lesson is clear. Even a 'runs-on-its-own' product—you must check for yourself what the actual stock weight is and whether you can withstand the maximum drawdown.
Frequently Asked Questions
Q. If I just follow the glide path, do I avoid losses?
No. A glide path is only a framework for adjusting the risk level according to age; it doesn't block a market decline itself. In 2008, there were cases where even funds for those near retirement fell more than -40%. As long as a stock weight remains, drawdowns and drawdown durations always exist, so checking in advance the maximum drawdown you can withstand comes first.
Q. Can't I just set it by '100 - age' alone?
It's fine as a starting point but can be too crude to use as-is. As lifespans lengthen, increasing bonds too early risks running short of funds after retirement, so these days people also use '110 - age' or '120 - age.' It's best to adjust according to income, savings, and the drawdown you can psychologically endure.
Q. Which is better, the 'To' method or the 'Through' method?
There's no right answer. 'To' aligns to the most conservative allocation at the retirement point, favoring principal protection, while 'Through' aims for growth even after retirement to prepare for a long old age. Even for the same target year, the stock weight at the retirement point can differ by as much as 40–55% depending on the method, so check the method in the product prospectus before subscribing.
📋 Results are based on historical data; past returns do not guarantee future returns.
📋 This service is provided for educational purposes to help you understand investing, not as investment advice.