Building a Retirement Portfolio: Glide Paths and Allocation

You can't run a retirement portfolio with the same asset allocation from 25 to 95. A 25-year-old's portfolio that's 100% stocks is reasonable; the same portfolio at 75 is reckless. A 75-year-old's portfolio that's 80% bonds is sensible; the same portfolio at 25 is a slow-motion disaster.

The fix is a glide path — a planned evolution of your stock/bond mix as you age. This is Part 4 of 6 of Retirement Essentials. In Part 3 we covered which accounts to use. Today: what to put in them, and how that mix should change over four decades.

What a Glide Path Is

A glide path is just a chart. On the horizontal axis: age (or years until retirement). On the vertical axis: your stock/bond mix. The line shows how the mix changes over time.

A typical glide path looks like this:

| Age | Stocks | Bonds | Notes | |---|---|---|---| | 25 | 90% | 10% | Long horizon; volatility doesn't matter | | 35 | 85% | 15% | Beginning to add bond ballast | | 45 | 75% | 25% | Risk reduction starts in earnest | | 55 | 60% | 40% | Pre-retirement de-risking | | 65 | 50% | 50% | Sequence-of-returns risk peak | | 70 | 55% | 45% | "Rising equity" glide path — see below | | 80 | 60% | 40% | Inflation protection matters again |

The shape isn't sacred. Some advisors prefer linear de-risking. Some prefer steep drops at specific milestones. Some advocate the controversial "rising equity glide path" where stock allocation increases in late retirement (which we'll explain). The point is that some glide path beats no glide path.

Why Allocation Must Shift With Age

The reason is time horizon, plain and simple. Stocks' historical advantage over bonds is real but irregular — they outperform in most decades, lose in some. Over 30 years, the probability of stocks outperforming bonds is roughly 95%. Over 5 years, it's roughly 70%. Over 1 year, it's roughly 60%.

When you have decades, the bad stretches don't matter — they get averaged out by the good ones. When your horizon shrinks, the bad stretches become survival-threatening. Bonds dampen volatility, which matters when you no longer have time to recover from a 40% drawdown.

There's another, more subtle reason: your human capital declines with age. A 25-year-old has 40 years of earning ahead of them, which is itself a kind of bond-like income stream. They can afford portfolio volatility because human capital provides ballast. A 70-year-old has minimal future earning power; they need the ballast inside the portfolio instead.

The Three Common Glide Path Patterns

Pattern 1: Traditional declining equity

The "default" glide path. Stocks decrease monotonically as you age, often along the "120 minus your age in stocks" line (so 60-year-old = 60% stocks, 70-year-old = 50% stocks, etc.).

Pros: Simple. Easy to explain. Matches behavioural risk tolerance. Cons: May be overly conservative for late retirement when inflation risk matters most.

This is what most target-date funds (TDFs) implement — products you buy once and they automatically rebalance over decades. Vanguard's Target Retirement series, BlackRock LifePath, Fidelity Freedom funds — all variations on this pattern.

Pattern 2: Rising equity glide path

A more recent academic idea: equity allocation decreases as you approach retirement, then increases through retirement.

The logic: sequence-of-returns risk (which we'll cover in detail in Part 5) is concentrated in the first decade of retirement. A 60/40 portfolio at age 65 protects against an early-retirement crash. But if you survive that decade without disaster, your remaining horizon is much shorter and you don't actually need much risk-reduction. Adding equity back lets you participate in long-term growth and hedge against inflation.

Wade Pfau and Michael Kitces, two well-known retirement researchers, have shown that rising equity glide paths historically outperform declining ones in late retirement. They look weird, but they're well-supported.

Pros: Reduces worst-case outcomes. Allows for late-retirement growth and inflation protection. Cons: Counterintuitive — most retirees resist re-adding stocks in their 70s. Requires discipline.

Pattern 3: Static / "set and forget"

Some retirement researchers (including Bengen, originator of the 4% rule) found that a constant 50/50 or 60/40 portfolio held throughout retirement does roughly as well as any glide path, with much less work.

Pros: Simplest possible approach. Empirically defensible. Cons: Probably too conservative in early career (when 80%+ stocks is optimal) and possibly too aggressive in late retirement.

How to Implement a Glide Path (Three Options, Increasing in Effort)

Option A: One target-date fund

Pick the target-date fund that matches your expected retirement year (e.g., "Vanguard Target Retirement 2060" if you'll retire around 2060). Buy only that fund. The fund does the glide path for you, automatically. Done.

This is the simplest possible retirement portfolio and outperforms what most retail investors achieve by self-managing. The downside is fees (typically 0.10–0.30%) and you're locked into the provider's choice of glide path.

Option B: Two ETFs, manually rebalanced

The "Boglehead two-fund" from our Investing 101 portfolio article but with the ratio adjusted each year to follow a glide path.

Concretely: hold one global stock ETF and one global bond ETF. Each year on the same date (your birthday is a natural choice), rebalance to the target ratio for your current age.

Track everything in the portfolio tracker. The asset allocation calculator gives you target ratios.

Option C: Three or four funds with sleeves

More sophisticated investors might add:

• A small allocation to international stocks (separated from global) for tilt control
• A small allocation to REITs or inflation-linked bonds as a different return stream
• A cash sleeve of 1–3 years of expenses (especially in retirement) — see "bucket strategy" in Part 6

For most readers, Option A or B is more than enough. Option C is added complexity for marginal benefit.

The "Bond Tent" Pre-Retirement Trick

A specific tactical move worth knowing: in the 5–10 years immediately before retirement, increase your bond allocation more aggressively than the standard glide path would suggest. Then, in the first 5–10 years of retirement, slowly reduce it back down.

If you plot this, it looks like a tent — bonds peak right around retirement age and fall on both sides. Hence "bond tent."

The purpose is to maximally protect against a market crash in the years right around your retirement date, when you have the largest portfolio you'll ever have and are starting to draw it down. After surviving that vulnerable decade, you can lift the equity weight again.

Practical version: be 65–70% bonds at retirement, glide back down to 40–50% bonds by age 75.

What About Single-Stock Concentration?

A common retirement-era mistake: keeping a large concentrated position in a single stock — often your former employer's. People rationalise this with "I know the company best" or "it's done so well for me." Neither is a good reason.

A single stock has company-specific risk that diversification eliminates for free. Even great companies (GE, Lehman Brothers, Sears, Nokia) have collapsed. A retirement that depends on one stock is one bankruptcy away from disaster.

A reasonable rule: no single position should exceed 10% of your portfolio, and ideally not more than 5% in retirement. If you have inherited or accumulated concentration above that, plan to sell it down gradually (tax-loss harvesting, gifting, or a written annual selldown schedule).

Glide Path for Early Retirees (FIRE)

If you're retiring at 45 instead of 65, the standard glide path overshoots. You can't afford to be 50/50 stocks/bonds at 45 — you have 50 years of retirement to fund and inflation will eat you alive on a bond-heavy portfolio.

Common adjustments for FIRE:

• Stay above 70% stocks even in early retirement (some go 80–90%)
• Apply a more conservative withdrawal rate (3.0–3.5%) to compensate for the higher volatility
• Use a "bond tent" pre-FIRE to mitigate sequence risk — but a smaller one than a traditional retiree would

Our financial independence guide digs into the trade-offs.

Action Items for This Week

1. 1Decide which option (A, B, or C) you'll use. Most readers should pick A or B and move on.
2. 2Look up your current actual allocation. Aggregate across all retirement accounts. Compare to your target.
3. 3Use the asset allocation calculator to determine your target glide-path point for today.
4. 4Schedule an annual rebalance. Pick a date (your birthday works), put it in your calendar, set a 30-minute appointment with yourself.

Next week, in Part 5, we'll tackle the most underappreciated risk in retirement planning: sequence-of-returns risk. The decade right around your retirement date matters disproportionately — and most retirees don't realise it until it's too late.