Our two glide paths were designed to help balance the three primary investment risks that participants face:
1. Longevity risk
The risk that participants will outlive their retirement savings.
2. Inflation risk
The risk of losing purchasing power over time due to insufficient capital appreciation.
3. Market risk
The risk of principal loss due to negative market fluctuation.
A target date glide path focused on supporting lifetime income will tilt more toward offsetting inflation and longevity risks. Whereas a glide path focused on moderating volatility near the target date will tilt more toward offsetting market risk.
While the allocations for both the Retirement Funds and the Target Funds continue to shift for 30 years past the target retirement date, they differ in equity allocations along the glide path.
The glide path has a higher equity allocation to address inflation and longevity risks.
- Higher equity allocation in transition to retirement than the industry average.
- Higher potential to support income withdrawals over longer time periods.
- Higher potential growth during the accumulation phase.
- 55% equity at the expected retirement date
The glide path has more moderate equity exposure to address market risk.
- Equity allocation in transition to retirement close to industry average.
- Higher potential to support moderate post retirement withdrawal time periods.
- Lower potential volatility in the transition to retirement.
- 42.5% equity at the expected retirement date.
IMPORTANT CHANGES TO THE TARGET DATE FUNDS: T. Rowe Price is making changes to the glide path of our target date funds. The glide path 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.
The principal value of the Retirement Funds and 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 retirement 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.