Heres a nice article that challenges that assumption by Joe Tomlinson that might be worth a read:
https://www.advisorperspectives.com/art ... tirement
Is time on your side?Should those further from retirement safely allocate more to stocks? I’ll use an example to challenge the popular notion that those with many years left until retirement can safely allocate heavily to stocks.
What about target date funds?Conventional wisdom might decree that the client with 20 years remaining should not be worried because stock market ups and downs will balance out over time, and additional stability will be provided by 20 years of future savings contributions
But that’s not what the results of this analysis indicate. There’s roughly a one-in-20 chance that savings at retirement will be less than half what is hoped for, and a one-in-four chance savings will be less than three-quarters of the desired amount.
When we compare the client with 20 years remaining to the one with five years, we see that time and future fixed savings have not reduced risk, but instead increased it. So time is not the great diversifier.
It may not be as simple as we think.For the target-date glide paths, the disappointing news is that the range of outcomes are not that dissimilar from the level 60/40 allocation. The distributions tighten somewhat, but mostly because the median results decline.
Switching to a target-date glide path is not the answer. We need to look for another approach.
The pre-retirement challenge of hitting a target number at retirement have not been adequately understood or researched. To some extent this is because of an unjustified faith in self-correcting properties of the stock market. This is a subset of the much more general problem of attempting to use volatile investments to meet fixed obligations, for example, in public pension funding. The pre-retirement phase provides its own unique and daunting challenges.