BALTIMORE, June 1, 2021 /PRNewswire/ -- T. Rowe Price (NASDAQ-GS: TROW) has developed a new
framework to help plan sponsors of defined contribution (DC) plans
assess retirement income solutions for participants to address the
evolving needs of retirees. The evaluation framework aims to enable
plan sponsors to adapt their DC plans to account for the full
retirement lifecycle – including those participants who are already
in retirement.
T. Rowe Price research shows that
retirement income is at the top of the list for plan sponsors when
discussing recovery from the "pandemic pause" of 2020. Conversely,
there is relatively slow progress in bringing retirement income
solutions to DC plans. In November 2020—nearly a year after the
passage of the SECURE Act–61% of plan sponsors reported that the
Act failed to motivate them to consider retirement income
solutions. Still, plan sponsors recognize the need to help their
participants as they move into retirement, which is the primary
motivator (59.4%)1 to develop retirement income
solutions cited by sponsors in a recent T. Rowe study.
"The retirement income pursuit is a complex issue for plan
sponsors and participants, and our objective is to help with
progress." says Lorie Latham, Senior
Defined Contribution Strategist. "To date, the retirement industry
has tended to lead with launching retirement income products and
with an aim to "sell" into plans. We hope to see a pivot toward
greater emphasis on the fundamental needs of retirees and plan
objectives. You need to gain a clear understanding of what you are
hoping to address before looking at the end solution."
Providing retirees with a suite of income solutions, or
"retirement tier" is widely agreed to be the preferred solution to
addressing the range of retiree needs. T. Rowe Price research shows 94% of DC consultants
agreed that a suite of income solutions is preferred to a single
retirement income offering. However, DC consultants also report
that only 13% of their plan sponsor clients currently provide, or
are planning to provide, a retirement tier2. T.
Rowe Price's new framework aims to
bridge this gap by offering plan sponsors a strategic and informed
evaluation process.
The framework is designed to help the assessment process and
narrow to solutions that are fit for purpose. Sponsors who
establish foundational principles to shape this framework and
narrow to a subset of solutions that committees can examine
further, and ultimately implement, will be in a better position to
make progress, Ms. Latham believes. Without doing this work, the
number and types of solutions in the market are overwhelming and
have proven challenging to wade through for most sponsors.
"In our view, plan sponsors will benefit from revisiting
specific inputs that drive the retirement income pursuit" says Ms.
Latham. "We've looked closely at retiree needs, spending patterns,
and how income needs evolve over time. Studying this data is
informative and will also help sponsors in assessing and
establishing the various solutions that meet their unique plan
needs."
Further, it's important to encourage sponsors to take
participants on the journey toward retirement through timely,
relevant, and actionable participant engagement. Helping
participants understand the way the plan can be leveraged is a key
factor in successful implementation and adoption. Working with
participants in the pre-retirement phase might also encourage them
to remain in the plan at retirement.
"By using the framework to focus committees on understanding
what retirement income needs they are solving for, plan sponsors
can clear the path for progress in the retirement income pursuit
and provide much needed solutions to their retiring participants."
said Ms. Latham.
ABOUT T. ROWE
PRICE
Founded in 1937, Baltimore-based T. Rowe Price Group, Inc., is
a global investment management organization with $1.59 trillion in assets under management as of
April 30, 2021. The organization
provides a broad array of mutual funds, subadvisory services, and
separate account management for individual and institutional
investors, retirement plans, and financial intermediaries. The
company also offers sophisticated investment planning and guidance
tools. T. Rowe Price's disciplined,
risk-aware investment approach focuses on diversification, style
consistency, and fundamental research. For more information, visit
troweprice.com, Twitter, YouTube,
LinkedIn, or Facebook.
1 Source: T. Rowe Price Retirement Income Plan
Sponsor Survey, 2020.
2 T. Rowe Price, 2020
Defined Contribution Consultant Study. Conducted in partnership
with Schaus Group. Survey population includes 20 defined
contribution consulting firms responding to a total of 41 questions
from 1/7/2020 -2/13/2020 and
4/8/2020 -4/21/2020.
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SOURCE T. Rowe Price Group, Inc.