What Is a Glide Path?
In plain English
A glide path is a predetermined schedule for gradually shifting a portfolio's asset allocation from higher-risk growth investments (stocks) toward lower-risk income investments (bonds and cash) as an investor approaches retirement. It is the core mechanism behind target-date funds and a key tool for managing sequence of returns risk.
How Does a Glide Path Work?
A typical glide path might start at 90% stocks / 10% bonds for a 25-year-old and gradually shift to 40% stocks / 60% bonds by age 65. The transition happens automatically in target-date funds or manually through periodic portfolio rebalancing. The goal is to reduce volatility as you approach the withdrawal phase.
What Is a "To" vs. "Through" Glide Path?
A "to" glide path reaches its most conservative allocation at the retirement date and stays there. A "through" glide path continues adjusting for 10-20 years into retirement, reflecting the fact that a 65-year-old may still have a 30-year time horizon. Most major target-date fund providers use the "through" approach for better long-term outcomes.
Should You Customize Your Glide Path?
Default glide paths work well for most investors, but individual circumstances may warrant adjustments. If you have a guaranteed pension or Social Security covering most expenses, you can afford a more aggressive allocation. If your retirement income depends heavily on portfolio withdrawals, a more conservative glide path may be appropriate.
Frequently asked questions
Is a glide path the same as a target-date fund?
A glide path is the strategy; a target-date fund is a product that implements it. Target-date funds automate the glide path based on your expected retirement year. You can also implement your own glide path manually by adjusting your asset allocation over time.
Can your glide path be too conservative?
Yes. Being too conservative too early can mean your portfolio does not grow enough to last 30+ years of retirement. Some retirees actually need to increase stock exposure if their allocation became overly conservative relative to their time horizon and income needs.
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Related terms
Target-Date Fund
A target-date fund is a single diversified investment that automatically shifts from growth-oriented to conservative allocations as you approach your target retirement year.
Asset Allocation
Asset allocation is how you divide your investment portfolio among different asset classes like stocks, bonds, and cash. Your allocation is the single biggest driver of your portfolio's long-term risk and return.
Sequence of Returns Risk
Sequence of returns risk is the danger that poor investment returns early in retirement can permanently deplete a portfolio, even if average long-term returns are acceptable.
Portfolio Rebalancing
Portfolio rebalancing is the process of realigning the weights of your investments back to your target asset allocation. It is a disciplined way to manage risk and enforce buying low and selling high.
Retirement Age
Retirement age refers to when you become eligible for Social Security benefits or choose to stop working, with key thresholds at 62, full retirement age (66–67), and 70.