What is a glide path in a 401(k)?
Learn how Betterment’s glide path guides your 401(k) from stocks to bonds—balancing growth and security as you near retirement.
Picture saving for retirement like taking a long flight. At the beginning of your journey, the plane climbs high and cruises at full speed—that’s your portfolio invested more aggressively in stocks to help your money grow. But as you get closer to your destination (retirement), the plane gradually descends for a smooth landing—that’s your portfolio shifting toward bonds and stability.
That gradual shift is called a glide path.
How a glide path works
A glide path is the built-in strategy that shifts your investments over time. When you’re younger, your portfolio is more aggressively invested in stocks, which historically provide higher growth in comparison to bonds. As you get closer to retirement, the glide path automatically moves your portfolio toward a more conservative mix with more bonds, to help protect your savings. When you’re closer to retirement or have already retired, there’s less time for stocks to recover after a selloff before you may need to make withdrawals.
ETF portfolio vs. target date fund glide paths
When saving for retirement, you might come across target date funds (TDFs). Target date funds package a glide path into a single fund based on the year you plan to retire. Please note: Your employer may have opted to provide a lineup of mutual funds to invest in that includes TDFs.
At Betterment, we also offer expert-built portfolios that rotate between multiple exchange traded funds (ETFs) over time, enabling a glide path. That means your investments still shift from more stocks to more bonds as you approach retirement, but your journey is personalized, so it adjusts to your needs rather than sticking to a fixed path.
Why Betterment’s glide path matters
Saving for retirement can feel overwhelming, but you don’t have to manage everything on your own. Whether you use a Betterment-built portfolio or a target date fund, a glide path adjusts your portfolio as you move through different stages of life. It’s designed to keep you growing when you have time on your side and protect what you’ve built as retirement gets closer. Here’s how it helps:
- Automatic adjustments: You don’t need to rebalance on your own, because your portfolio adjusts for you.
- Personalized portfolios: Your Betterment 401(k) account uses a diversified portfolio that’s built to handle turbulence—so you don’t have to worry about every bump along the way.
- Retirement readiness: glide paths help balance growth when you’re younger with stability as you near your destination: retirement.
Every retirement journey is different, but we’re here to help you take off with confidence, adjust as you go, and arrive at retirement prepared for the next chapter.