Target date investment funds have bonds as a higher % as you get older. Wouldn't you want to keep it in stocks so your portfolio lasts forever?

Hello PFC followers!

Target date index funds sound great! However, so you investment grows at roughly at 7% every year, wouldn’t you want the allocation to always be about the same? 90% stock / 10% bonds? Then not only can you technically live forever, but when you do pass away, you can pass it on to others and they could start retirement early! And if you do use a TDIF, let’s say target is 2065, and to keep the 90% stock / 10% bonds balance, just sell all your investment in the TDIF 2065 and move it to a later one? like TDIF 2080? Would this apply to IRAs, 401ks, and normal brokerage accounts (non tax advantaged)?


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Hi Sean, well first of all the 7% you’re referring to is probably based off of past performance but shouldn’t be assumed moving forward because we can’t predict the future (it could very likely be more than that).

Second, as you get older you want to be less aggressive because you are more concerned about wealth preservation than growth in retirement. In theory if the market was guaranteed 7% growth annually, then sure, but that 7% is average—meaning there are some years where the market is up 20% and others where it goes down 40%. A 40% dip in your portfolio is easier to swallow when you’re young and far from retirement, but at an older age or in retirement that could have a major impact and you won’t have the time to recover like you would when you’re younger.

When you’re young it’s hard to think of preservation and being conservative when right now you’re aggressive and just looking at average annual returns, but the purpose of the TDIF is to adjust your asset allocation and rebalance automatically for you over time and as you approach your retirement age.

Jeremy also has a bunch of articles on TDIF you can reference, including a thread I started a while back similar to yours! Either way, don’t overthink it.


Hi Sean!

In addition to what @thberry10 said, I’d just put yourself in the shoes of someone who is 65 or 70. When I talk to people at that phase of their life, they’ve spent the last 40+ years working, amassed a nice little nest egg that’s enough to get them comfortably through the rest of their lives. They’re suddenly less concerned about “maximizing growth” and more concerned about something weird happening in the market, their nest egg getting cut in half and suddenly they can’t just coast anymore.

This is essentially the “wealth preservation” point Tom made.

But some people certainly agree with you. If you have SO much at retirement that even getting cut in half won’t break your ability to live out your golden years, then yeah, leaving it all in stocks could be fine!

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thanks @thberry10 and @Jeremy! @thberry10, thanks for sharing the other thread! It is really helpful to read too! thanks for sharing that!

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