What is the End Game With Target-Date Funds; Retirement or Death?

I recently read a great article written by Jeb Graham at 401khelpcenter.com. Please see below.

An article recently published in a retirement plan industry journal addressed criticisms of the construction of Target-Date Retirement portfolios that are based on a "through" retirement approach. The term "through" retirement implies that the glide-path, the formula by which the portfolio's asset allocation rebalances over time, carries through retirement to death. This strategy is contrasted by the "to" retirement approach, in which the glide-path is designed to end, or become static, at retirement, as opposed to death.

The article responded to charges that most near-term (2010) target-date funds (TDFs) were much too aggressively invested in equities, and the harm caused to TDF investors in 2008 could have been avoided. The author, in his response, used universally accepted financial planning themes to support the conclusion that an individual's asset allocation at normal retirement date of 65 should be in the neighborhood of a 50% stock/50% bond mix, thus justifying a 2010 TDF with such an allocation. Maybe the bigger question is not really what percentage is allocated to equities, but rather, what is the end game, i.e. retirement or death?

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To read the rest of the article, please go to the 401khelpcenter.com link.

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