Recognizing that Retirement is a Journey, not a Destination
Neither the principal nor the underlying assets of the Principal LifeTime investment options are guaranteed at any time, including the target date. Investment risk remains at all times.
As investors get closer to their targeted retirement date, the Principal LifeTime portfolios strive to become increasingly more conservative. Our proprietary Glide Path facilitates the implementation of an asset allocation strategy designed to adapt to a time horizon that gradually shortens as the investor ages.
With Principal LifeTime portfolios, target allocations change over time based on the number of years investors have until their target retirement dates, which represent the approximate dates they start to withdraw money.
Investors who are many years from retirement face the risk of failing to save and invest aggressively enough to adequately fund retirement spending. They have more time to recover from market lows and reap the advantages of market highs that may occur. For these investors, a more aggressive investment allocation may be appropriate. After selecting the most appropriate target-dated portfolio, based upon the approximate year the investor intends to begin using the money, an individual can continue his or her working career, knowing the asset allocation will be regularly re-adjusted by our portfolio management team to a typically more conservative allocation.
For Principal LifeTime portfolios that are managed many years away from their target date, the portfolio managers' strategy focuses on diversification and maximizing growth. Therefore, these portfolios are invested more heavily in equity-focused investment options, with a lower allocation to fixed income investment options.
As time passes and the target retirement date becomes increasingly closer, a gradual shift takes place to a more traditionally conservative allocation. With their retirement date approaching, investors tend to seek balance between continued wealth accumulation and a desire to avoid significant capital losses in the years remaining until retirement. Therefore, the allocation gradually transitions from an emphasis on equities to an emphasis on fixed income — which continues through retirement.
Along this Glide Path, each portfolio is shifted to ever-more conservative asset classes and investment styles.