T. Rowe Price's podcast offers solutions - Understanding the Factors of Production: Key Elements in Finance

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Season four builds on three previous seasons of the podcast series, which featured popular episodes around bridging the racial retirement savings gap, becoming a retirement-ready woman, retirement strategies for LGBT+ investors, how the psychology of money influences financial behavior, and the value of financial advice and unretirement.

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We talked to podcast host Kim Zook, who is vice president of T. Rowe Price Group, and . Michael Davis, head of Global Retirement Strategy at T. Rowe Price, who co-hosted the first episode of Season 4, titled “Taking Advantage of 50 Years of Retirement Innovation Inspired by ERISA” about lessons learned on retirement planning.

Q: What are some lessons for employers on retirement savings that they can pass on to their employees?

Michael Davis: There are several key lessons for employers about retirement savings that employees will benefit from. First, offering a retirement plan for employees that provides good investment offerings, fees that are reasonable, and a good employer match on employee contributions has proven to make a major difference in retirement outcomes.

We have also found that having an automatic enrollment feature that automatically enrolls new employees into the plan, coupled with an opt-out feature for those who want to take a different approach, gets new employees into the plan sooner which enables them to save more over time.
Further, having a default option such as a target date fund, that is broadly diversified, well-constructed and with good long-term performance, provides exceptional benefits for employees that are saving for retirement. Target date funds have become, by far, the most popular default option offered in U.S. retirement plans, and we think the benefits that they offer including diversification, rebalancing, simplicity, and an asset allocation that gets progressively more conservative as the employee gets closer to retirement, have been the key drivers of their popularity. T. Rowe Price is the largest manager of active target date assets in the industry and launched its first target date fund in2002.

Q: What are the benefits of traditional and alternative investments in a retirement plan?

Davis: Traditionally, defined contribution plans (DC) have included a mix of equity and fixed income options along with a capital preservation option such as a money market or stable value fund. This array of choices provides a diversified set of options for employees to consider and enables employers to comply with federal law regarding the construction of these plans. Usually, there is also a default option in the plan as well, which is often a diversified investment product such as a target date fund. This mix of options has served employees well and by having more employers who are using automatic enrollment, more employees are starting to save earlier and achieving better retirement outcomes.

Given the growth in alternative investments such as private equity, private credit, direct real estate and infrastructure, there have been more questions about whether these products should be included among other DC plan options. These products may offer increased diversification benefits either through increased return profiles or risk mitigation benefits. Our view is that alternative investments are not likely to be offered as stand-alone products in the DC line-up, but rather as part of a broader diversified option, such as a part of a target date fund.

We are seeing increased interest in the inclusion of alternative investments in retirement markets outside of the U.S., such as Australian, Canada and the UK. In the US, this interest is still forming as employers are navigating concerns around potential litigation, cost and liquidity. We are seeing new innovations in the design of these products and expect interest in this space to grow over time. Given T. Rowe Price’s extensive retirement platform, we believe that we can offer differentiated insights and solutions in this arena.

Q: How important is it for employers to include income solutions within a retirement plan?

Davis: As the U.S. continues to age and more Americans are either at or nearing retirement, the availability of retirement income solutions becomes more important. Employers should give some consideration to what role they want to play in the delivery of retirement income solutions. First, an employer needs to think about what their key objectives are for their retirement plan. Do they want to encourage employees to stay in the plan after retirement, or not? Then, if they want to encourage employees to stay in the plan post-retirement, what sort of tools or solutions would they want to provide to their employees?

We have done a lot of research in this area and have found there is no one solution that is likely to address the myriad of retirement income needs that employees are likely to have. Some may want an option with an embedded annuity. Others may want a solution that is more liquid and portable. Either way, they will likely need help in navigating through the plethora of solutions that are being developed.

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T. Rowe Price has developed a 5-Dimensional Framework that is designed to help plan sponsors, and their advisors, align their employees’ retirement income preferences with the solution type that may best fit that profile. Additionally, we launched our first retirement income solution in2017, have recently launched an additional solution this year, and are planning to stay at the forefront of change in this rapidly evolving segment of the retirement ecosystem.

Q: What are some particularly helpful retirement topics on upcoming podcasts that employers might find useful for their staffers?

Kim Zook: Some valuable retirement topics in Season 4 of ‘CONFIDENT CONVERSTATIONS on Retirement’ that employers might find particularly appealing include: “Navigation Inflation and Market Volatility,” “Retirement Income Planning and Common Mistakes to Avoid,” “Innovative Strategies for Customizing Your Retirement Income Plan,” “The Advantage of Traditional and Alternative Investments for Retirement,” and “Living and Long-Term Care Considerations for the Second Half of Retirement.”

Our podcast topics are informed by our extensive retirement platform which includes over $1 trillion of retirement assets, a recordkeeping subsidiary that administers plans for over 2.4 million participants, and our industry leading target date franchise. The insights we gain from our platform enables us to us ask better questions in developing our research insights and in determining podcast topics that are topical and at the leading edge of innovation.

Q: Is T. Rowe Price the only asset management company offering podcast for retirement savers?

Zook: While there are few firms that offer podcasts for retirement savers, our podcast series is unique in that it equips listeners with knowledge, tools, and confidence to create the future they imagine. This knowledge stems from T. Rowe Price’s extensive experience and dedication to understanding the individual needs and goals of investors, gained over more than four decades. We continue to ask critical questions about the retirement landscape, ensuring our insights remain relevant and actionable. In order to meet our listeners where they are, our podcast is available wherever they get their podcasts.

“Confident Conversations on Retirement” is available on all major podcast platforms, including Apple Podcasts and Spotify

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