Why Your 2050 Fund Suddenly Owns More Stocks
When target-date funds (TDFs) debuted in the late 1990s, portfolio designers assumed most retirees would tap accounts for 25 years, give or take. Fast-forward to 2025: new actuarial tables estimate that a healthy 65-year-old woman now has a one-in-four chance of living past 96 and a non-trivial chance of crossing the century mark. Long-run capital-market forecasts have also tilted lower, making bonds less able to shoulder lifetime income on their own.
In response, several of the industry’s largest managers—led by T. Rowe Price, but followed quickly by American Funds and, in modified form, by Fidelity—have begun pushing equity weight higher along their glide paths. Retirees entering the income phase may soon hold 55 to 60 percent in stocks at age 65, versus roughly 45 percent when the original glide paths were published.
Below we unpack the prospectus tweaks, compare old and new glide paths, test how the extra equity alters risk and return over a 35-year retirement, and outline questions every 401(k) participant should ask before defaulting into a “set-it-and-forget-it” date-stamp fund.
1 What Changed in the Latest Prospectus Updates?
| Manager | Vintage Funds Affected | Equity at Age 65 (Old) | Equity at Age 65 (New) | Years to “Landing Point” |
|---|---|---|---|---|
| T. Rowe Price | Retirement 2005-2065 | 55 % | 60 % | 30 yrs → 35 yrs |
| American Funds | Target Date Series | 50 % | 57 % | 30 yrs → 40 yrs |
| Fidelity* | Freedom Blend | 53 % | 55 % | 25 yrs → 30 yrs |
* Fidelity kept its index (Freedom K) glide path unchanged for now.
Key language in T. Rowe’s May supplement cites “increased longevity expectations and lower forward bond returns” as drivers. American Funds broadened the change, extending the glide for four decades past retirement, arguing that “investors no longer stop investing at 65—they decumulate over time.”
The tactical moves share three features:
- Higher starting equity during the final decade before retirement.
- Slower decline in equities after retirement, typically by 0.5-1.0 percentage points per year versus roughly 2 points in prior designs.
- Later landing point—the glide path stops at a 40 / 60 stock-bond mix, but now only after age 95 rather than age 80.
2 Side-by-Side Glide-Path Graphic
Equity %
80 | Old Path
| •
70 | • New Path
| • •
60 | • •
| • •
50 | •••••••••• •
| • •
40 | • ••••••••••••
50 60 70 80 90 100
Age
Illustrative for T. Rowe Price Retirement 2035. Each dot equals five percentage points of equity. The “landing” at 40 percent equity now occurs 15 years later.
3 Risk–Return Simulations for a 35-Year Retirement
Using a 10,000-path Monte Carlo model (2 percent real bond return, 5 percent real stock return, 12 percent stock volatility, 3 percent inflation), we compared:
- Old Glide Path: 55 percent equity at 65 ➝ 40 percent by age 80
- New Glide Path: 60 percent equity at 65 ➝ 40 percent by age 95
Results (starting balance $1 million; 4 percent real withdrawal):
| Metric | Old Path | New Path |
|---|---|---|
| Median Ending Wealth at 100 | $730 k | $870 k |
| Probability of Ruin* | 12.8 % | 9.6 % |
| Worst-Decile Drawdown | –34 % | –39 % |
| 10-Year Rolling Volatility | 7.9 % | 9.2 % |
*Portfolio hits zero before age 100.
Interpretation: Holding more equity delayed the risk of running out of money and raised median terminal wealth, but it also deepened the worst drawdowns, especially during early-retirement bear markets. That trade-off may feel acceptable to investors who value longevity protection and can stomach larger interim swings.
4 Fee Check: Active vs. Passive Glide Paths
| Series | Active / Index Blend | Weighted ER (2050 fund) |
|---|---|---|
| T. Rowe Retirement | Active core | 0.64 % |
| American Funds Target Date | Active | 0.61 % |
| Fidelity Freedom Blend | 85 % index | 0.49 % |
| Fidelity Freedom Index | 100 % index | 0.12 % |
| Vanguard Target Retirement | 100 % index | 0.08 % |
Higher equity exposure magnifies compounding on both returns and costs. Paying 60 basis points instead of 10 means surrendering roughly $15,000 over a 30-year horizon on a $100,000 balance—about the same as an extra year of groceries in retirement.
5 Checklist for Plan Participants
- What glide path does my default fund follow?
Active shop? Blend? Pure index? Ask for the fund’s “equity landing point” and “landing date.” - How does the fund treat longevity risk?
A further-out landing point may better match a 90-year lifespan. Some funds freeze equity at retirement—others scale down for 30 years. - What is the net expense ratio after revenue sharing?
Some plans rebate part of the fee; look at the share class your plan actually holds. - Are there in-plan guaranteed income options?
A higher-equity glide path pairs well with a deferred annuity sleeve to hedge late-life sequence risk. - How flexible is the fund around big life events?
Target-date wrappers are convenient but rigid. If you anticipate large lump-sum spending, taxable-account drawdowns, or phased retirement, you may want a custom mix.
Practical Tips for DIY Adjustments
- Layer risk in buckets. Keep 2-3 years of spending in cash-like assets outside the TDF to weather bear markets.
- Tilt tax-efficiently. If your 401(k) hosts a high-equity TDF, hold more bonds in IRAs to maintain overall risk balance.
- Revisit at milestone birthdays. The new glide paths assume hands-off investors. Don’t be afraid to shift allocations if your circumstances change.
Bottom Line
Target-date funds remain the workhorse of U.S. retirement plans, capturing roughly two-thirds of new 401(k) contributions. Their built-in glide paths were never carved in stone, and today’s longevity data are forcing designers to admit an uncomfortable truth: bonds alone cannot fund a 35-year payout horizon.
By nudging equity weights higher and stretching glide paths longer, managers hope to lower the probability that retirees outlive their money. Yet higher return potential comes only with higher interim volatility—and, in many cases, higher fees.
Savvy savers should view the shake-up as a prompt, not a prescription. Ask your provider how your fund’s new path aligns with your personal risk tolerance, income needs, and life expectancy. Adjust where necessary. Because in retirement—as in life—it isn’t the date on the fund that matters most; it’s how long you plan to stick around.
Disclosure:
The information above is provided for educational and informational purposes only and does not constitute investment advice, trading advice, or a solicitation to buy or sell any financial instrument. Past performance is not a guarantee of future results. All investments carry risk, including the possible loss of principal. Always conduct your own research or consult a licensed financial professional before making any investment decision.