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Are Glide Path Strategies Still a Good Option for Retirement?


Target date funds that have reached the end of their glide path and have a 30% stocks, 70% bonds allocation may produce essentially no return on an inflation-adjusted basis over the next ten years.

Target date funds operate under the assumption that someone’s asset allocation should follow a glide path, automatically shifting a portfolio to favor bonds over stocks as a person gets closer to their expected year of retirement.

The rationale for offering target date funds is presumably altruistic: help investors facing a long retirement to avoid investment mistakes that may deplete their nest egg.

However, the inflexible nature of the glide path’s embrace of bonds could reintroduce short-fall risk if fixed-income returns are too small to materially make up for account withdrawals and the expected rising cost of living.

In examining the potential for that risk, Horizon Investments followed a two-step process. First, we collected the projected ten-year returns for global markets published by 12 of the leading investment managers in the industry – the average of their projections is detailed below.Using these projections, and three representative portfolio allocations found in a typical target date fund glide path, Horizon then calculated annualized returns for people who are: 

  • Far from retiring with a mix of 90% stocks, 10% bonds
  • Nearing retirement with a mix of 60% stocks, 40% bonds
  • In retirement with a mix of 30% stocks, 70% bonds1

Based on industry forecasts, retirees with money in a target date fund that’s reached the end of its glide path is expected to produce an average annual return of essentially 0% for the next decade when factoring in the Federal Reserve’s quest to target an inflation rate of 2%. (Note: a retiree’s annual rate of inflation may exceed the Fed’s 2% target. For example, healthcare costs alone are projected to rise by 5.9% per year during a 25-year retirement, according to Healthview Services.2)

Horizon, as a goals-based investment manager that utilizes active portfolio strategies, believes financial planning in a low-yield world should proactively seek to offset the potentially corrosive impact of both historically small bond yields and rising inflation as a retiree pursues their objectives for current income and legacy wealth.

We also believe that advisors may want to take an active approach to managing those parts of a client’s portfolio that involve glide path strategies given the potential short-fall risks (see our Q2 FOCUS magazine article on active financial advice being the new reality).

Horizon believes that advisors and their clients may want to consider active fixed-income investment management, bond-like alternatives and a larger tilt towards equities to provide the income and growth that today’s retirees will likely need over the course of a long retirement. See the Real Spend® product page for details on Horizon’s distribution strategies that seek to address both short-fall and longevity risks.


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1  To calculate the projected returns, Horizon assumed the equity allocation was comprised of 75% U.S.large-cap stocks and 25% international stocks (comprising 80% developed market, ex-US stocks and 20% emerging market stocks) with the bond portion allocated to U.S. Treasuries.

2 Source: Healthview Services, “2021 Retirement Healthcare Costs Data Report’’


Nothing contained herein should be construed as an offer to sell or the solicitation of an offer to buy any security. This report does not attempt to examine all the facts and circumstances that may be relevant to any company, industry or security mentioned herein. We are not soliciting any action based on this document. It is for the general information of clients of Horizon Investments, LLC (“Horizon”). This document does not constitute a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual clients. Before acting on any analysis, advice or recommendation in this document, clients should consider whether the security in question is suitable for their particular circumstances and, if necessary, seek professional advice. Investors may realize losses on any investments. Index information is intended to be indicative of broad market conditions. The performance of an unmanaged index is not indicative of the performance of any particular investment. It is not possible to invest directly in an index.

Past performance is not a guide to future performance. Future returns are not guaranteed, and a loss of original capital may occur. This commentary is based on public information that we consider reliable, but we do not represent that it is accurate or complete, and it should not be relied on as such. Opinions expressed herein are our opinions as of the date of this document. These opinions may not be reflected in all of our strategies. We do not intend to and will not endeavor to update the information discussed in this document. No part of this document may be (i) copied, photocopied, or duplicated in any form by any means or (ii) redistributed without Horizon’s prior written consent.

The twelve large asset managers mentioned herein were chosen because these managers make their projected returns available to the public for this time period.

The charts and visuals are for illustrative purposes only and should not be considered a guarantee of success or a certain level of performance. More information about the calculations used herein are available from Horizon. 

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