New research: Rethinking lifecycle investing in a longer-life world

Decisions rooted in data

Since its inception in 1993, BlackRock’s LifePath® platform has been at the forefront of lifecycle investing, continually evolving to meet the changing realities of markets, participants and longevity. Every refinement we make to glidepath design, asset allocation and portfolio implementation is rooted in evidence and data. It’s a research philosophy that emphasizes a continuous process—refining assumptions, incorporating new data and aligning lifecycle design with real participant needs.

Today, three structural forces are driving the need for further evolution:

1. Populations are aging and longevity is increasing.
   According to the U.S. Census Bureau, more Americans are turning 65 than ever before, and they are living longer, redefining the retirement planning landscape.
2. The source of retirement spending is shifting.
   The move from DB to DC plans places the burden of portfolio construction on individuals rather than institutions.
3. The impact of AI is wide ranging.
   This technology is redefining the future of work and labor income, as it also transforms how we model, measure, and manage risks and opportunities.

A new era for portfolio construction

Lifecycle investing is evolving into a unified system for the DC era, one that adapts over time and across asset types. BlackRock aims to build an integrated platform: integrating public and private markets, insurance solutions, and dynamic management to deliver more personalized outcomes. It’s the next evolution in a long legacy of leading innovation: shifts from active to index investing, accumulation to income and fund-building to system-building, always with a laser focus on helping participants retire with confidence and control.

Steady income for longer

Throughout a person’s career, earnings rise, peak and then decline. For those just starting out, the earnings runway is long and can therefore take greater financial risk. For those closer to retirement, that runway is a lot shorter and therefore that risk should be reduced.

This income curve informs the level of financial risk a lifecycle investment strategy takes over time – and our investment philosophy:

• Grow: Aim to maximize growth potential when young.
• Protect: Aim to maximize certainty during the retirement window.
• Spend: Aim to maximize spending consistency in retirement.

Until now, we’ve anchored our research in the University of Michigan’s Panel Study of Income Dynamics (PSID). However, we are now enhancing our modeling by combining PSID and data from the Current Population Survey (CPS).

Why? Recent plan design work revealed that actual participant income patterns align more closely with CPS, which: offers a broader, more up-to-date view of current income dynamics, covers roughly 110,000 individuals and is updated monthly. It focuses on individuals rather than households, aligning better with retirement savings decisions.

The latest CPS data shows that earnings decline more gradually after their peak than PSID suggests, meaning people earn steady income for longer and can afford to take modestly more financial risk later in their careers—specifically between ages 45 and 60.

Fine-tuning longevity accuracy

Longevity risk—the risk of outliving savings—is a major concern. It complicates retirement planning because no one knows exactly how long their savings will need to last. Additionally, about 50% of workers retire earlier than expected¹ impacting lifetime earnings and savings.

With that in mind, most people should plan for a retirement window rather than a specific year. 

To address this savings uncertainty, the industry uses mortality tables, which estimate life expectancy. There are two main types:

• Period (static) tables assume current mortality rates apply to everyone.
• Cohort (generational) tables adjust rates based on birth year and expected changes over time.

BlackRock’s latest research uses cohort mortality tables for U.S. private-employer DB plans, reflecting recent improvements in life expectancy and aligning with best practices (the IRS adopted these tables for pension reporting in 2024). This update doesn’t materially change recommended risk levels, but it does improve modeling accuracy.

Greater potential for wealth

Our updated models now incorporate broader population data and more realistic assumptions about income stability and longer lifespans. This all supports a slower, more measured reduction in risk between ages 45 and 60, potentially resulting in greater wealth at retirement for a significant percentage of individuals.