BALTIMORE, Oct. 2, 2024
/PRNewswire/ -- T. Rowe Price, a
global investment management firm and leader in retirement, today
published a new white paper that found a drawdown withdrawal
strategy in retirement—where income is derived from principal and
portfolio returns—paired with guaranteed1 income from a
deferred annuity, can provide a high level of retirement income and
while maintaining adequate liquidity for retirees.
"There is a common misunderstanding that annuities are an all or
nothing decision for retirees," said Berg Cui, Ph. D., senior
quantitative investment analyst at T. Rowe
Price and author of the paper. "We believe that pairing
annuities with a drawdown strategy could create a more balanced
retirement income experience that better matches a retiree's needs
for both income and access to funds."
Key insights from the paper include:
- There is a growing trend of defined contribution (DC)
participants staying in-plan upon retirement, and more plan
sponsors are exploring in-plan retirement income solutions to
support them. T. Rowe Price's
2024 DC Consultant Study found that the percent of plan sponsors
that consultants categorized as currently offering or planning to
add a retirement income solution more than doubled in recent years,
from 8% in 2021 to 18% in 2024.
- Pairing a drawdown strategy with an annuity may be a better
match for retirees who need to maximize income and maintain
adequate liquidity. Providers have been known to pair endowment
strategies, where income is sourced from portfolio returns and the
principal is mostly preserved, with annuities. However, the paper
argues that annuities are better matched with drawdown strategies,
where income is sourced from both the portfolio returns and
principal. This pairing can deliver a high level of income without
significant loss of liquidity.
- Due diligence is key for plan sponsors during insurer
selection and when evaluating the product to ensure that it is a
good fit for the plan. Consultants and advisors can help plan
sponsors choose the right mix of capabilities that work for their
participant demographic.
"T. Rowe Price is committed to
empowering plan sponsors and advisors with the research and
knowledge required to make the best, most impactful decisions for
retirement savers at every stage of the journey," said Sudipto Banerjee, Ph. D., director of retirement
thought leadership at T. Rowe Price.
"Ultimately, our goal is to ensure that every retiree can approach
their future with financial confidence."
ABOUT T. ROWE PRICE
Founded in 1937, T. Rowe Price
(NASDAQ – GS: TROW) helps individuals and institutions 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. Clients rely on the award-winning firm for its retirement
expertise and active management of equity, fixed income,
alternatives, and multi-asset investment capabilities. T.
Rowe Price serves millions of
clients globally and manages US $1.61
trillion in assets under management as of August 31, 2024. About two-thirds of the assets
under management are retirement-related. News and other updates can
be found on Facebook,
Instagram, LinkedIn, X, YouTube,
and troweprice.com/newsroom.
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1 Income guarantees are subject to
the claims paying ability of the insurer.
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IMPORTANT INFORMATION
Investment Risks: Investments are subject to risk
including possible loss of principal. Those at or near retirement
are subject to sequence of returns risk, where potential losses at
this time could have a more significant impact on income for
retirement from investments.
Annuities information and risks: Guarantees are subject
to the claims paying ability of the insurer. Annuities may be
subject to higher fees, including commissions upon purchase,
surrender charges, administrative fees and other costs. Riders may
be available to help customers customize their policy and provide
additional benefits. Riders are optional and available at an
additional cost. Contracts and other offering documents should be
read carefully as they describe risk factors, terms of the
contract, and fees and charges that may apply. An annuity is a
long-term vehicles designed for retirement. An annuity isn't
intended to replace emergency funds or to fund short-term savings
goals. T. Rowe Price does not
issue any annuity products.
This is not a recommendation or investment advice, and the
material does not take into account individual investor
circumstances including total assets, that should be considered
prior to investing or purchasing annuities.
Source: 2024 Defined Contribution Consultant Study: This study
included 48 questions and was conducted from January 12, 2024, through March 4, 2024. Responses are from 35 consulting
and advisor firms with over 134,000 plan sponsor clients and more
than $7.5 trillion assets under
administration.
This material is provided for general and educational purposes
only and is not intended to provide legal, tax, or investment
advice. This material does not provide recommendations concerning
investments, investment strategies, or account types; it is not
individualized to the needs of any specific investor and not
intended to suggest any particular investment action is appropriate
for you.
The views contained herein are as of the date written and are
subject to change without notice; these views may differ from those
of other T. Rowe Price
associates.
This information is not intended to reflect a current or past
recommendation concerning investments, investment strategies, or
account types, advice of any kind, or a solicitation of an offer to
buy or sell any securities or investment services. The opinions and
commentary provided do not take into account the investment
objectives or financial situation of any particular investor or
class of investor. Please consider your own circumstances before
making an investment decision.
Information contained herein is based upon sources we consider
to be reliable; we do not, however, guarantee its accuracy.
T. Rowe Price Investment Services, Inc., distributor, and T.
Rowe Price Associates, Inc., investment adviser.
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SOURCE T. Rowe Price Group