Managed payout investments are investment options (specifically, a trust) within your retirement plan. Unlike a regular withdrawal from your retirement plan that sells the amount of shares/units (for simplicity, referred to as shares) you own in your investments, managed payout investments provide monthly income without selling the number of shares you own. They are designed to support income through retirement.

When you invest in a managed payout investment, your total investment amount will generate a monthly income. You can choose how much to invest based on your desired monthly income from this investment. This amount is sent to you for the rest of the calendar year, as long as you don’t make any changes to the amount you invested.

The monthly income will vary from year-to-year based on the investment’s performance, but you’ll be notified every year of what the next year’s monthly income will be.

Depending on the managed payout investment’s performance, you could potentially receive monthly income throughout retirement and still hold some of your original balance. This is not the stated goal of the managed payout investment and is not guaranteed or considered a feature of the trust.

Here is a hypothetical example (hypothetical figures based on past performance of Retirement 2020 Trust-Income B):

If you invested $500,000 in Retirement 2020 Trust-Income B on August 1, 2022, you would have received $1,884 every month from August through December.

In September 2022, the payout rate for Retirement 2020 Trust-Income B would have been recalculated to determine what your monthly income would be starting in January 2023. In this case, your 2022 monthly income was recalculated to $2,128.

Managed payout investments’ monthly income is calculated with a specific formula designed to support monthly income through your retirement. In general, the calculation considers the 5-year performance history and the price per share, and pays out an annual rate of approximately 5%.

Here’s a more detailed explanation: The total annual payment amount per share/unit is 5% of the average month-end value per share/unit (also referred to as the net asset value [NAV]) of the managed payout investment over the previous 5 years (60 months). Next year’s rate is determined at the end of every year (using data as of September 30) and that amount is paid out over the next calendar year through 12 equal monthly payments. The calculations and income amounts are subject to standard rounding.

Here is an example: At the end of the year, the average monthly net asset value (as of September 30) for the previous 5 years was $20.86. The next calendar year’s total annual payment amount per share will be $1.043 (or 5% of $20.86). That amount is distributed over 12 months, resulting in a monthly payment amount of $0.00869 per share ($0.4275 divided by 12). If you own 10,000 units of the managed payout investment throughout the current year, you would receive $869 a month, or $10,428 annually.

Yes. You can stop, change, or restart your monthly income at any time. You can make a change by exchanging your retirement plan account balance into or out of, or taking a withdrawal from, the managed payout investments. Any changes made to the number of units/shares of managed payout investments would generate a new monthly income amount. If you exchange out of a managed payout investment, you will not be able to exchange back into the investment for 30 days.

There is no fee charged to you specifically for exchanging into a managed payout investment and for receiving the income from this investment. T. Rowe Price receives fees for managing managed payout investments in the form of an annual trustee fee. This fee is reflected in the returns from the managed payout investment, which means the return you see from your managed payout investment has already had fees subtracted.

Income is taxed in the same manner as other distributions from the plan. Federal tax withholding will be automatically calculated and applied to the taxable portion of your monthly income as if you are married and claiming three withholding allowances. You can change (or elect out of) federal tax withholding by calling our retirement specialists at @@PLAN_PHONE_NUMBER@@. State tax withholding (including District of Columbia) will be withheld as required by law based on your address of record.

The value of your shares of managed payout investments is tied to market performance and can lose value, therefore, future calendar years’ monthly income will vary based on market conditions.

To increase relative predictability and stability of the yearly income, the calculation considers the 5-year performance history to determine the next year’s payment rate.

Also, income may not keep pace with inflation (the increase in the price of goods and services over time).

Managed payout investments follow the same target/retirement date investment approach as their equivalent target/retirement date plan investment option that does not include a managed payout program. The managed payout investments invest in a broad range of portfolios made up of stocks and bonds. Over time, the managed payout investment’s higher allocation to stocks, which are traditionally riskier, shifts gradually to a higher allocation of bonds, which provides more conservative investments.

Managed payout investments are designed to support monthly income through retirement. The income that is generated from the managed payout investment could be a combination of investment earnings and the managed payout investment selling some of the underlying investments. Depending on the circumstances, you could potentially receive this monthly income throughout retirement and still hold your original number of units/shares. Depending on the market performance, the value of the investment may be equal to, greater, or less than the original amount invested. Maintaining or growing the balance is not the stated goal of the managed payout investment. It is also possible that with poor market performance, the earnings from the investment won’t equal your total monthly income. If this is the case, maintaining the same monthly income amount throughout a calendar year may result in the managed payout investment selling some of the underlying investments.

No. An annuity is an insurance product that provides a predetermined regular and guaranteed series of payments from the insurer. In exchange for the guarantee, you generally lose access to the money paid for the annuity and cannot modify the payment amount without incurring surrender charges and/or penalties. This is not an insurance product nor is the income guaranteed. You can change the amount invested in the managed payout investment at any time.

If you are invested in a managed payout investment on the 15th of the month (or on the next business day the New York Stock Exchange [NYSE] is open, if the 15th falls on a day the NYSE is closed), you will receive your monthly income for that month. Payments are processed generally within two business days of this date.

You can choose to have your income directly deposited into your bank account of choice or receive a check in the mail every month.

You can exchange into a managed payout investment with your existing retirement savings account balance. You can choose to exchange all or some of your retirement savings depending on your monthly income needs. Start your exchange online or call @@PLAN_PHONE_NUMBER@@.