With 40 years of defined contribution (DC) experience, we have gained valuable insights from the behavior, preferences, and investment tendencies of our almost 2 million participants.* This experience has helped to inform how we manage our target date solutions.
Recognizing that sponsors have different needs and that those needs have changed over time, T. Rowe Price has continually enhanced its target date offerings. As the DC industry continues to evolve, we have found that sponsors usually have two primary investment objectives for their plan:
We now offer two target date products—Retirement Funds and Target Retirement Funds—to give sponsors the ability to select the one that best aligns with their plan’s needs.
The primary difference between the Retirement Funds and Target Retirement Funds is the equity allocation along the glide path. This manifests itself in defining the following attributes:
The principal value of the Retirement Funds and Target Retirement Funds (collectively, the “target date funds”) is not guaranteed at any time, including at or after the target date, which is the approximate year an investor plans to retire (assumed to be age 65) and likely stop making new investments in the fund. If an investor plans to retire significantly earlier or later than age 65, the funds may not be an appropriate investment even if the investor is retiring on or near the target date. The target date funds’ allocations among a broad range of underlying T. Rowe Price stock and bond funds will change over time. The Retirement Funds emphasize potential capital appreciation during the early phases of retirement asset accumulation, balance the need for appreciation with the need for income as retirement approaches, and focus on supporting an income stream over a long-term retirement withdrawal horizon. The Target Retirement Funds emphasize asset accumulation prior to retirement, balance the need for reduced market risk and income as retirement approaches, and focus on supporting an income stream over a moderate postretirement withdrawal horizon. The target date funds are not designed for a lump-sum redemption at the target date and do not guarantee a particular level of income. The key difference between the Retirement Funds and the Target Retirement Funds is the overall allocation to equity; although they each maintain significant allocations to equities both prior to and after the target date, the Retirement Funds maintain a higher equity allocation, which can result in greater volatility over shorter time horizons.
* As of 12/31/13
For over two decades, we have managed asset allocation portfolios, adding value through portfolio construction, risk management, and glide path design. A long-term approach underlies this philosophy.
The T. Rowe Price Retirement Active Trusts and Retirement Date Trusts (the “Trusts”) are not mutual funds. They are common trust funds established by T. Rowe Price Trust Company under Maryland banking law, and their units are exempt from registration under the Securities Act of 1933. Investments in the Trusts are not deposits or obligations of, or guaranteed by, the U.S. government or its agencies or T. Rowe Price Trust Company and are subject to investment risks, including possible loss of principal.