T. ROWE PRICE LAUNCHES INNOVATIVE FRAMEWORK TO AID EVALUATION OF RETIREMENT INCOME SOLUTIONS

Rhea-AI Summary

T. Rowe Price has introduced an innovative, patent-pending five-dimensional framework to help defined contribution (DC) plan sponsors evaluate and choose retirement income solutions. This framework, developed in collaboration between T. Rowe Price’s global retirement strategy team and global multi-asset research team, addresses the industry’s need for a common, unbiased evaluation method.

The five dimensions considered are: longevity risk hedge, level of payments, volatility of payments, liquidity of balance, and unexpected balance depletion. These metrics help plan sponsors understand the tradeoffs across various retirement income products and how they align with the unique needs of plan participants.

The framework aims to standardize the process of evaluating retirement income solutions, facilitating better decision-making for DC plan sponsors, advisors, and consultants.

Positive

• Introduction of a comprehensive, patent-pending five-dimensional framework to evaluate retirement income solutions.
• The framework addresses a gap in the industry by providing a common, unbiased evaluation method.
• Collaboration between T. Rowe Price's global retirement strategy team and global multi-asset research team.
• The framework considers five key metrics: longevity risk hedge, level of payments, volatility of payments, liquidity of balance, and unexpected balance depletion.
• Aims to standardize the process of evaluating retirement income solutions, aiding better decision-making.

Negative

• No specific financial data or direct impact on T. Rowe Price's financial performance mentioned in the PR.

Five-dimensional framework offers retirement plan sponsors the ability to identify 'best-fit' retirement income solutions for their defined contribution (DC) plan participants

BALTIMORE, June 18, 2024 /PRNewswire/ -- T. Rowe Price, a global investment management firm and a leader in retirement, unveiled a new, patent-pending framework to help defined contribution (DC) plan sponsors evaluate retirement income offerings and quantify which solutions may best fit the needs and preferences of their plan participants. Today, most DC plan sponsors describe their participant demographics as aging, and they express a desire to retain retired participants in the plan throughout retirement.¹ Both factors are contributing to the interest in evolving the DC plan to better accommodate the needs of pre-retirees and retired participants.

T. Rowe Price's global retirement strategy team and global multi-asset research team collaborated on developing the framework, recognizing that the industry lacked a common, unbiased method to help plan sponsors evaluate the growing universe of retirement income products. The five-dimensional (5-D) framework fills this gap. It offers DC plan sponsors, their advisors, and consultants a standard language to understand how different retirement income products require tradeoffs to meet specific plan participant objectives.

Investments solutions used during the savings phase are generally evaluated on a two-dimensional basis, focusing on a certain level of return for a given level of risk. This new 5-D framework for the decumulation phase identifies a wider range of objectives unique to the spending phase, namely:

• Longevity risk hedge: how many years will retirement savings last?
• Level of payments: what will the amount of annual income be?
• Volatility of payments: how much can "paychecks" change from year to year?
• Liquidity of balance: if a need arises, how much savings can be accessed?
• Unexpected balance depletion: how high is the risk of money running out earlier than planned?

Quantifiable metrics assess how well various retirement income solutions may help plan participants achieve these objectives.

"We are continuously evolving our retirement research and offerings to facilitate choice and personalized solutions that can best fit retirees' needs," said Sebastien Page, Head of Global Multi Asset and Chief Investment Officer at T. Rowe Price. "It is our hope that the 5-D framework and supporting research will become a standard for how in-plan retirement income solutions are evaluated. Our team has created an unbiased and uniform model that allows plan sponsors to visualize, compare, and contrast retirement income products."

"Much of the retirement income research conducted to date focuses on identifying participant preferences, for example, 'I want a guaranteed stream of income.' However, it fails to consider the other side of the ledger, 'I am willing to give up X% in monthly income' to achieve that preference," said Jessica Sclafani, Global Retirement Strategist at T. Rowe Price. "The interconnected nature of the 5-D framework examines and quantifies these tradeoffs that are uniquely inherent to retirement income needs. It offers a common method to compare and evaluate retirement income solutions."

For more information, an article, "A five‑dimensional framework for retirement income needs and solutions", by Berg Cui, senior quantitative investment analyst, and Jessica Sclafani, further explores the framework and includes a hypothetical case study on how plan sponsors can apply its learnings.

ABOUT T. ROWE PRICE
Founded in 1937, T. Rowe Price (NASDAQ: TROW) helps people around the world achieve their long-term investment goals. As a large global asset management company known for investment excellence, retirement leadership, and independent proprietary research, the firm is built on a culture of integrity that puts client interests first. Investors rely on the award-winning firm for its retirement expertise and active management approach of equity, fixed income, alternatives, and multi-asset investment capabilities.

T. Rowe Price manages USD$1.54 trillion in assets under management as of May 31, 2024, and serves millions of clients globally. News and other updates can be found on Facebook, Instagram, LinkedIn, X, YouTube, and troweprice.com/newsroom.

---

¹ T. Rowe Price, 2024 DC Plan Sponsor Considerations and Actions on Retirement Income. Specifically, 71% of respondents "strongly agree" or "somewhat agree" with the statement, "The demographics of our plan participants are older now versus 10 years ago," and 69% of respondents "strongly agree" or "somewhat agree" with the statement, "We want more participants to keep their DC balances in our plan after they retire."

View original content:https://www.prnewswire.com/news-releases/t-rowe-price-launches-innovative-framework-to-aid-evaluation-of-retirement-income-solutions-302173802.html

SOURCE T. Rowe Price Associates, Inc.

FAQ

What is the new framework launched by T. Rowe Price for evaluating retirement income solutions?

T. Rowe Price launched a five-dimensional framework to help DC plan sponsors evaluate retirement income solutions.

What are the five dimensions considered in T. Rowe Price's new framework?

The five dimensions are longevity risk hedge, level of payments, volatility of payments, liquidity of balance, and unexpected balance depletion.

How does T. Rowe Price's new framework benefit DC plan sponsors?

It provides a standardized, unbiased method to evaluate and compare retirement income solutions, aiding better decision-making.

Who collaborated to develop T. Rowe Price's five-dimensional framework?

T. Rowe Price's global retirement strategy team and global multi-asset research team collaborated on the framework.

When did T. Rowe Price announce the launch of their new framework for retirement income solutions?

T. Rowe Price announced the launch on June 18, 2024.