BALTIMORE, June 1, 2021 / PRNewswire / – T. Rowe Prize (NASDAQ-GS: TROW) has developed a new framework to help defined contribution (DC) plan sponsors evaluate retirement income solutions for members to meet the changing needs of retirees. The valuation framework is intended to allow plan sponsors to tailor their defined contribution plans to take into account the full retirement lifecycle, including members who are already retired.
T. Rowe Prize research shows retirement income tops the list for plan sponsors when discussing recovery from the 2020 ‘pandemic pause’. Conversely, progress is relatively slow in providing solutions retirement income to defined contribution plans. In November 2020, nearly a year after the SECURE law was passed, 61% of plan sponsors said the law had not motivated them to consider retirement income solutions. Yet plan sponsors recognize the need to help their members as they retire, which is the main motivator (59.4%)1 develop retirement income solutions cited by promoters in a recent study by T. Rowe.
“The pursuit of retirement income is a complex issue for plan sponsors and members, and our goal is to help them move forward. said Lorie Latham, Senior Defined Contribution Strategist. “To date, the retirement industry has tended to lead the way by launching retirement income products and with the goal of ‘selling’ into plans. We hope to see a pivot to greater emphasis on the basic needs of retirees and the goals of the plans. a clear understanding of what you hope to resolve before considering the final solution. ”
Providing retirees with a suite of income solutions, or “retirement tier” is widely recognized as the preferred solution for meeting the range of retiree needs. T. Rowe Prize research shows that 94% of DC consultants agreed that a suite of income solutions is better than a single retirement income offer. However, the DC Consultants also report that only 13% of their plan sponsor clients currently offer, or plan to provide, a level of retirement.2. T. Rowe’s Price The new framework aims to fill this gap by providing plan sponsors with a strategic and informed assessment process.
The framework is designed to facilitate the assessment process and be limited to solutions tailored to the objective. Sponsors who establish fundamental principles to shape that framework and limit themselves to a subset of solutions that committees can further consider, 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 on the market are overwhelming and have proven difficult for most sponsors to navigate.
“In our view, plan sponsors will benefit from the review of specific inputs that guide the pursuit of retirement income,” Ms. Latham said. “We took a close look at the needs of retirees, spending patterns and changing income needs over time. Studying this data is informative and will also help plan sponsors evaluate and establish various solutions that meet their unique plan needs. ”
Additionally, it is important to encourage sponsors to lead participants on the retirement journey through timely, relevant and achievable participant engagement. Helping participants understand how the plan can be leveraged is a key factor for successful implementation and adoption. Working with participants in the pre-retirement phase could also encourage them to stay in the scheme after retirement.
“By using the framework to focus committees on understanding the retirement income needs they are meeting, plan sponsors can pave the way for advancements in the pursuit of retirement income and provide much-needed solutions to their retired participants. Ms Latham said.
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Founded in 1937, BaltimoreT. Rowe Price Group, Inc., based in T. Rowe, is a global investment management organization with $ 1.59 trillion in assets under management at April 30, 2021. The organization offers a wide range of mutual funds, sub-advisory services and separate account management for individual and institutional investors, pension plans and financial intermediaries. The company also offers sophisticated investment planning and guidance tools. T. Rowe’s Price The disciplined and risk-aware investment approach focuses on diversification, style consistency and fundamental research. For more information visit trowe inconnu, Twitter, Youtube, LinkedIn, Where Facebook.
1 Source: Survey of Retirement Income Plan Sponsors by T. Rowe Price, 2020.
2 T. Rowe Prize, 2020 Defined contribution consultant study. Produced in partnership with the Schaus Group. The survey population includes 20 defined contribution consulting firms that answered a total of 41 questions from 1/7/2020 -2/13/2020 and 4/8/2020 -4/21/2020.
SOURCE T. Rowe Price Group, Inc.