As leaders in target date investing, T. Rowe Price understands the importance of planning for retirement. We deliberately and thoughtfully evolve our capabilities and anticipate shifts in investor behaviors, preferences, and markets in an effort to achieve better long-term outcomes.
Committed to Improving Investor Outcomes Through Prudent Innovation
- Our sharp focus on outcomes means we consistently seek to deliver value.
- Our experience and passion for research means we understand the challenges faced in meeting retirement goals and achieving a lifetime of income.
- We know taking a long-termview can make a meaningful difference in retirement.
There's A Lot at Stake
- We understand the path to achieving a secure retirement may not always come easy.
- Managing risk requires a holistic approach—it’s why we factor in a myriad of risks over a lifetime of investing.
- In a world of uncertainty, we understand the importance of knowing when to take the right risks to both plan for growth and managing volatility.
Glide Paths Designed to Consider Your Needs
- We design our glide paths to factor in and adapt to the many risks faced by investors to and through retirement in an effort to better help support lifetime income.
- Our glide paths are thoughtfully constructed to holistically manage risk while seeking growth when it matters most.
- We understand everyone’s retirement journey will be different—that’s why our glide paths help plan for what might be unexpected along the way.
We are pleased to announce the continued evolution to our Target Date strategies with these enhancements:
1. Enhancements to the Retirement and Target glide paths
We are making thoughtful enhancements to the Retirement and Target glide paths by modestly increasing the amount of growth-seeking assets early in the lifecycle and post-retirement.
WHAT? The T. Rowe Price target date solutions are managed based on a specific retirement year (target retirement date), which is the approximate year an investor would plan to retire (assuming a retirement age of 65). The allocations to stocks and bonds automatically adjust to become more conservative over time according to a “glide path.” Beginning in the second quarter of 2020, the glide path will gradually change to increase its overall stock allocation at certain points and accordingly decrease its bond allocation. Target date strategies at or near the retirement date will not experience an increase in equity from their current levels.
|Product||Glide Path Enhancement|
|Retirement Funds 2005-2065||Yes|
|Retirement I Funds 2005-2065||Yes|
|Retirement Balanced Fund||No|
|Retirement Balanced I Fund||No|
|Retirement Income 2020 Fund||Yes|
|Target Funds 2005-2065||Yes|
WHEN? The changes to the glide path began in the second quarter of 2020. Adjustments to stock allocations will be made incrementally, and we expect the transition to the enhanced glide path to take about two years to complete.
HOW? As shown in the illustration below, the overall allocation to stocks at the beginning of the enhanced glide path (40+ years to retirement) will increase from 90% to 98%; the 98% stock allocation will remain constant until the fund is 30 years from its target retirement date for the Retirement glide path and 35 years from its target retirement date for the Target glide path. The overall allocation to stocks at the end of the enhanced glide path (30 years past retirement) will increase from 20% to 30%. There are increases to the overall stock allocation along other points of the enhanced glide path but the overall stock allocation at the target retirement date will remain at 55% for the Retirement glide path and 42.5% for the Target glide path.
WHY? T. Rowe Price regularly reviews our offerings and thoughtfully evolves our capabilities and solutions as part of our ongoing commitment to meeting the needs of our clients. We are making these enhancements to our target date franchise based on multiple factors, including our ongoing extensive research and evolved modeling capabilities.
We believe these enhancements find the right balance between investing for growth while managing risks to help our clients achieve the desired outcomes for their retirement.
IMPORTANT CHANGES TO THE TARGET DATE FUNDS: T. Rowe Price is making changes to the glide paths of our target date funds. The Retirement and Target glide paths will be transitioning to the allocations shown above. Specifically, beginning in the second quarter of 2020, the funds’ glide path will gradually change to increase its overall equity allocation at certain points and accordingly decrease its bond allocation. Note that there will be no change to the allocation at the target retirement date. For example, the equity allocation at the beginning of the enhanced glide path will be increasing from the original 90% allocation and will be increasing from the original 20% allocation at the end of the glide path. Adjustments to equity and bond allocations will be made incrementally, and we expect the transition to the enhanced glide path to be completed in the second quarter of 2022, depending on market conditions. The 2065 vintage follows the enhanced glide path and does not have a transition period. Please download a prospectus for additional details.
2. Modifications to the underlying building blocks to improve diversification and risk-adjusted returns
T. Rowe Price understands the importance of diversification in a portfolio and continuously seeks out the best investment opportunities. As part of these enhancements, we are adding two additional equity strategies to the underlying building blocks to help identify additional opportunities for growth while providing further diversification and risk management:
Emerging Markets Discovery Stock: We are adding Emerging Markets Discovery Stock strategy to the building blocks to help reduce risk within our overall emerging markets exposure. It does so by providing style, sector, country, and factor diversification. We do not expect this addition to result in a material change in return expectations, and therefore, the risk reduction is expected to increase risk-adjusted returns.
U.S. Large-Cap Core: We are adding the U.S. Large-Cap Core strategy to the primarily active target date products. We expect the addition of this strategy to these products can potentially:
- Introduce or increase the active exposure within the large-cap component of our shorter-dated portfolios.
- Create a consistent active risk profile within the equity segment of portfolios across the glide paths.
- Diversify strategy concentration in our longer-dated portfolios and reduce concentration of S&P 500 exposure in the shorter-dated portfolios.
- Improve risk-adjusted performance potential.
Similar to the glide path enhancements, implementation began in the second quarter of 2020 and Emerging Markets Discovery Stock and U.S. Large-Cap Core strategies will be added to the allocations of the impacted products over the course of the next two years.
|Product||Addition of Building Blocks|
|Emerging Markets Discovery Stock Fund||U.S. Large-Cap Core Fund|
|Retirement Funds 2005-2065||Yes||Yes|
|Retirement I Funds 2005-2065||Yes||Yes|
|Retirement Balanced Fund||Yes||Yes|
|Retirement Balanced I Fund||Yes||Yes|
|Retirement Income 2020 Fund||Yes||Yes|
|Target Funds 2005-2065||Yes||Yes|
3. A new top-down fee structure for our mutual funds
T. Rowe Price regularly reviews our pricing and investment policies as part of our ongoing commitment to offering a wide range of competitively priced products that meet the needs of our clients. After extensive analysis, we determined changing from our current mutual fund fee structure to a new top-down fee structure for our funds-of-funds target date mutual fund products would be beneficial to shareholders.
We are implementing a unitary fee structure for all target date mutual funds, where an all-inclusive management fee rate for these funds is set at the top level target date fund and will no longer be a function of the underlying funds’ management fees.
The new restructured unitary fee will provide shareholders with a simplified, consistent, and transparent approach to fees across all target date suites, individual vintages, and their share classes. This also gives T. Rowe Price the ability to directly adjust the fees of the funds-of-funds without changing the fees of the underlying component funds or adjusting the allocation mix.
The target date funds-of-funds will not experience any fee increases as a result of this fee restructure. In general, the updated fees under the new unitary fee structure are equal to or lower than the previous total expense ratios for each fund and share class.
The new fee structure was completed in April 2020.
|Product||Mutual Fund Fee Restructuring|
|Retirement Funds 2005-2065||Yes
(Investor, Advisor, R Classes)
|Retirement I Funds 2005-2065||Yes
|Retirement Balanced Fund||Yes
(Investor, Advisor, R Classes)
|Retirement Balanced I Fund||Yes
|Retirement Income 2020 Fund||Yes
|Target Funds 2005-2065||Yes
(Investor, Advisor, I Classes)
Investors in the mutual funds of the affected T. Rowe Price target date products do not need to take any action as a result of these enhancements and were notified of the enhancements starting February 13, 2020. The various target date enhancements began in April 2020, with implementation of the enhanced allocations to occur over an approximate two year period. For additional information, please refer to the prospectus or trust documentation.
The principal value of the Retirement Funds and the Target 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 postretirement withdrawal horizon. The Target 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 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.