To vs Through Retirement

Quick definition: "To retirement" glide paths become static at the target date, holding a fixed allocation through retirement, while "through retirement" glide paths continue shifting toward more conservative allocations for decades after retirement, reflecting changing needs as you age.

Key Takeaways

• "To retirement" funds maintain a constant allocation from the target date onward, shifting active management to retirees
• "Through retirement" funds continue automatic rebalancing after retirement, steadily becoming more conservative over time
• The choice depends on personal preferences for active versus passive management, life expectancy expectations, and withdrawal strategy
• "Through retirement" approaches address sequence-of-returns risk better but may become overly conservative for very long-lived individuals
• Most experts now favor some form of "through retirement" approach, recognizing that retirement lasts multiple decades

Understanding "To Retirement" Philosophy

A "to retirement" glide path takes a fundamentally different view of the retirement transition than a "through retirement" approach. Rather than treating retirement as a 30-year journey requiring ongoing adjustments, a "to retirement" fund suggests that once you reach your target retirement date, your allocation should stabilize. The fund's job ends; your management job begins.

In practice, a "to retirement" fund might have been shifting steadily from 90% stocks 30 years before retirement toward 50% stocks at the target date. Upon reaching that date, the fund stops its automatic rebalancing schedule. The allocation remains at 50% stocks until the investor manually rebalances or moves to a different fund entirely. The responsibility for further allocation adjustments passes from the fund manager to the individual retiree.

The philosophy underlying this approach is pragmatic: the fund provider has done its job by bringing you to retirement with an appropriate allocation. From that point forward, your specific circumstances—expected lifespan, health status, other income sources, financial needs—become too individualized for a generic glide path to address effectively. One investor might live to 95 and need continued growth; another might live to 100 and require substantial income; another might pass at 80 and want to leave a legacy. No single post-retirement allocation serves all these needs equally.

The Appeal of "Through Retirement" Approaches

The alternative philosophy embraces continued management through the retirement years. "Through retirement" glide paths typically specify allocations extending to age 95 or beyond, continuing the process of reducing equity exposure well into retirement. A fund might specify 50% stocks at age 65, declining to 40% at age 75 and 30% at age 85.

This approach reflects research on sequence-of-returns risk—the observation that portfolio performance in the early years of retirement disproportionately affects long-term wealth. If a retiree experiences a significant market downturn early in retirement while withdrawing funds, the portfolio may never recover. Gradually reducing equity exposure before and during retirement is intended to mitigate this risk by requiring fewer stock sales during downturns.

Additionally, "through retirement" approaches implicitly assume that longevity planning remains important throughout retirement. Inflation continues throughout retirement; returns are needed to preserve purchasing power; and for someone at age 80 who might live to 95, having some equity exposure provides growth potential for a 15+ year time horizon. A static 50% allocation from age 65 to 95 seems inconsistent with the notion that someone at 80 should invest more conservatively than someone at 65.

Sequence-of-Returns Risk and Portfolio Sustainability

The mathematics of sequence-of-returns risk provide powerful support for "through retirement" approaches. Consider two investors, both retiring with $500,000 at age 65 with a 50% stock, 50% bond allocation. Both plan to withdraw $20,000 annually (4% of starting value) for 30 years.

Investor A experiences a severe bear market in years 1-3 of retirement, with stocks declining 40%. With a static 50% stock allocation, they're forced to sell stocks at depressed prices to fund withdrawals. By age 75, their portfolio has declined to $300,000 despite decades of contributions ending. Investor B, following a "through retirement" glide path, has gradually reduced equity exposure during those same three years, so they held only 40% stocks during the crash. They sold fewer stocks at depressed prices and by age 75 retain $350,000.

This example captures why "through retirement" approaches have become increasingly popular. The automatic derisking during market downturns provides meaningful portfolio protection during vulnerable years when withdrawals are occurring.

Time Horizons and Equity Allocation

A fundamental principle in investing is matching asset allocation to time horizon. Someone with 40 years until retirement can hold 85% stocks because they have time to recover from market downturns. Someone with 10 years until retirement should hold 60% stocks because they need to begin preserving capital. Following this logic, someone at age 85 with a 10-year expected lifespan should hold a moderate equity allocation reflecting that 10-year horizon.

Yet many "to retirement" funds essentially say: once you reach retirement, time horizon no longer matters for your allocation. You hold the same 50% stocks whether you're newly retired at 65 or advanced in age at 85. This seems inconsistent with fundamental asset allocation principles.

"Through retirement" approaches embrace this principle, recognizing that age is a proxy for remaining time horizon. Someone at 85 should generally hold less risky assets than someone at 65, even if both are technically in retirement.

Practical Implications for Retirees

A retiree using a "to retirement" fund reaches their target date and faces a decision: keep the static allocation, manually rebalance annually, or switch to another fund. This requires active engagement. For investors comfortable managing their portfolio, this can be appropriate. For those preferring passive management, it requires either learning a new system or undertaking significant additional planning.

A retiree using a "through retirement" fund experiences continued automatic adjustment. The fund continues managing allocation without investor intervention, providing simplicity and reducing the risk that a retiree will forget to rebalance or will maintain an overly conservative allocation due to sequence-of-returns anxiety.

The practical difference in effort is significant. A "through retirement" approach requires annual statement review but no decision-making. A "to retirement" approach requires active rebalancing decisions, at least periodically.

Modern Consensus and Industry Trends

The financial services industry has gradually shifted toward "through retirement" approaches over the past decade. This shift reflects growing research on sequence-of-returns risk and recognition that retirement lasts multiple decades, not a single fixed period. Most major fund companies now offer "through retirement" versions alongside or instead of "to retirement" versions.

Vanguard's Managed Payout Funds follow a clear "through retirement" philosophy, continuing rebalancing throughout retirement with the explicit goal of managing sequence-of-returns risk. Fidelity's Freedom Index funds follow a "to 2000" approach for those already retired, then transition to managed allocations. BlackRock's iShares target-date funds include both approaches.

For investors starting their retirement planning today, defaulting to a "through retirement" approach is typically appropriate. The automatic risk management addresses real behavioral and mathematical risks that retirees face.

Longevity Assumptions and Personal Planning

The choice between "to retirement" and "through retirement" approaches should be informed by longevity assumptions. If family history suggests living to 90+, a "through retirement" approach that continues reducing equity exposure into your 80s may become too conservative. If longevity is uncertain, the automatic de-risking of a "through retirement" approach provides valuable insurance against sequence-of-returns risk.

Additionally, other factors matter: whether you have significant non-portfolio income (Social Security, pensions), whether you plan to leave a substantial legacy, and whether you want to optimize for maximum income or portfolio preservation. These personal factors might suggest modifications to either approach.

Next

Explore the relationship between equity allocation and age, examining how research informs the specific percentage allocations recommended for different life stages.