This subject is complicated, and it will involve a few future posts, so let’s think of this as an “intro to X."
By Will McGough on October 25, 2019
This subject is complicated, and it will involve a few future posts, so let’s think of this as an “intro to X.” When looking at glide path charts, the horizontal axis (X) represents “time” in some fashion. It could be someone’s age, implied age, ideal year (i.e. target date) you want to retire, or ‘time horizon’ which is years to-and- from a terminal or post-terminal time horizon event, you guessed it, such as retirement!
Dictionary.com does a good job explaining X too:
Since its inception, the letter X has struggled to establish its own identity, so it may be no coincidence that X is commonly used to represent the unknown in both language and mathematics.
Is it any wonder now that a glide path’s X-axis can be hotly debated? I mean, it represents the unknown, in both language and math. One would be much easier to handle, but seriously, both?
In our research, we researched every target date fund family’s public website and found some interesting results. Most speak of time horizon in terms of years to and from retirement and many use simple age. We prefer, however, those that call it “implied age.”
Why? Let’s not forget what a TDF actually is. It is called a target date fund. With that word—date—meaning a future year that someone targets to retire, and the fund is the vehicle they should invest in.
For any traditional wealth management, time horizon represents the amount of time you have until the horizon sunsets on your investment goals. For retirement wealth management, though, we use the three factors explained by the letters TDF. Who said this was easy?
Rest assured, though, only one of these factors is concerning. It all starts with age—i.e. how old are you now? Then, when might you want to retire? Easy right? Well now, how long do you think you will live? Ok, not so easy anymore, is it?
Dictionary.com notwithstanding, the “X” factor isn’t so easily defined!
Author: Will McGoughChief Investment Officer of Retirement Will McGough joined Stadion Money Management in 2003 and currently serves as Chief Investment Officer of Stadion’s Retirement investment strategies which comprises oversight of Stadion’s risk-based, target date, and managed account strategies. He is a member of the Investment Committee and Senior Management team, and serves as as Stadion’s Chief Investment Officer, Retirement. He provides thought leadership for Stadion’s participant level, customized retirement solutions, in order to ensure that its glide path technology and asset allocation are able to support all intermediaries in the defined contribution ecosystem. Will received his BBA in Finance from the University of Georgia and also holds the Chartered Financial Analyst designation. Will is a member of the CFA Institute, the CFA Society of Atlanta, the American Association of Professional Technical Analysts, National Association of Active Investment Managers, the UGA Alumni Association and National Eagle Scout Association.
There is no guarantee of the future performance of any Stadion account. Material has been derived from sources considered to be reliable, but the accuracy and completeness cannot be guaranteed. Results based on available universe of Target Date Fund Series, which includes registered mutual funds, and non-registered collective investment funds and insurance accounts. Collective investment funds and insurance accounts are only available for investment to qualified retirement plan assets such as 401(k) plans.
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