Volatility-Managed Target Date Funds | RPC

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This article proposes a volatility-managed target date fund (TDF) that scales the equity weight of a standard age-based glide path to align realized portfolio volatility with the target volatility implied by the glide path. Stationary-bootstrap simulations using a century of US market data show that the volatility-managed TDF delivers a more stable risk profile and improves the terminal-wealth distribution relative to the static TDF. These results hold for a band-constrained implementation that limits deviations from the glide path, after accounting for transaction costs, over shorter investment horizons, and across alternative glide-path specifications, volatility estimation methods, and labor income assumptions. The evidence suggests that volatility management offers a practical enhancement to conventional glide-path design.

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