The Making of a Glide Path: Understanding the Impact of Design Decisions on Retirement Outcomes
Authors: Rich Weiss - CIO, Multi-Asset Strategies; Radu Gabudean - VP, Portfolio Manager; Nancy Pilotte - VP, Sr Client Portfolio Manager
The defining characteristic of a target-date solution is its glide path—the level, slope and landing point of the equity allocation over the life of the series. In this paper, we describe the process and philosophy that underlie the creation of our target-date solutions to further the understanding of design decisions on retirement outcomes.
To explain how we arrived at our glide path, we 1) lay out the “balance-of-risks” framework informing our approach to target-date fund (TDF) evaluation and construction; 2) present our “no-investor-left-behind” philosophy that seeks to provide the highest likelihood of a fully funded retirement for the greatest number of participants; 3) revisit the “to” versus “through” debate and discuss the relationship of glide path slope to risk management; 4) review analysis and third-party research suggesting that retirees fare better when the glide path reaches its most conservative allocation precisely at the retirement date and remains flat thereafter.