Targeting Retirement Security with a Dynamic Asset Allocation Strategy

The goal of investing for retirement is to secure a target level of income that maintains the individual’s preretirement lifestyle. Current “safe harbor” glide-path products shift investments from stocks to bonds on the basis of the individual’s age. This approach is unlikely to secure a target retirement income because the glide path is focused on the wrong goal. We tested a dynamic asset allocation strategy that takes no view of future market performance and is based on a retirement income goal. We show how this dynamic strategy could dominate standard portfolio choices. The article introduces a new way to think about intermediate retirement targets and explores the implications of the dynamic asset allocation strategy for the level of savings required to achieve a retirement goal.Disclosure: The authors report no conflicts of interest. Editor’s Note This article was externally reviewed using our double-blind peer-review process. When the article was accepted for publication, the author thanked the reviewers in the acknowledgments. Christina Atanasova, Michael Drew, and one anonymous reviewer were the reviewers for this article.Submitted 1 October 2019Accepted 14 April 2020 by Stephen J. Brown.