Target Date
Seeking to Take the Right Risk at the Right Time
The T. Rowe Price Target Series
Every retirement journey is unique, and T. Rowe Price offers solutions to help meet various retirement goals. Each solution is driven by our rigorous investment process which centers around your plan’s goals and objectives.
The Target Series is one solution that may be appropriate for clients who are seeking to support retirement income while also managing volatility near the point of retirement.
This may include investors with other assets from which to draw retirement income and who may not need to focus on growing their assets as much as possible, investors with significant retirement savings, or investors who simply want to more closely manage volatility near an approaching retirement date.
Regardless of the reason, selecting the right glide path is critical to meeting your goals and objectives. A properly designed glide path balances market and longevity/inflation risks and seeks to take the right risk at the right time.
Seeking to Capture Growth While Managing Risk
Our desire is to help retirement investors accumulate the money they need to retire when they want. At the same time, we seek to actively balance market and longevity risk to help maintain the money they have worked so hard to save. This means we want to capture as much of the market upside as possible while reducing the risk of short-term market declines.
Our Target glide path design incorporates more equity at the outset to drive higher growth potential and higher account balances at retirement. Investors benefit from the compounding of more growth assets early on and have several decades prior to retirement to help manage price volatility. To help mitigate volatility, our level of equity dips below the peer group average of similar strategies as we approach the retirement date, and we maintain that lower equity exposure through the initial years of retirement.
Real World Example: T. Rowe Price Target 2025 Fund
The following data shows how much market performance—as defined by the S&P Target Date Index—our Target 2025 Fund captured in both up and down markets. The 2025 vintage may be appropriate for participants looking to retire in the next few years and for which market risk is top of mind.
The Target series portfolios have 42.5% equity at retirement, which is less than the median competitor at 46.0% and S&P at 48.4%.
Over trailing three-year, five-year, and since inception periods, the T. Rowe Price Target 2025 Fund captured most of the market upside and provided meaningful protection during drawdowns. This resulted in attractive up-down capture ratios across all three time periods.
T. Rowe Price Target 2025 Fund vs. S&P Target Date 2025 Index
As of 9/30/2024
| Three Years | Five Years | Since Inception* | |
|---|---|---|---|
| Up Capture | 89.46% | 95.70% | 95.72% |
| Down Capture | 94.38% | 94.92% | 95.44% |
| Up-Down Capture Ratio | 1.05 | 1.01 | 1.00 |
Past performance is not a reliable indicator of future performance.
* Shown from first full month-end following investor class inception, August 31, 2013.
Source: Morningstar Direct as of 9/30/2024.
Upside and downside capture are measures, by percentage, of how well a fund performed compared with an index during times of market growth or market downturns, respectively. A higher upside capture and lower downside capture can result in better returns for investors.
Our target date strategic design and investment processes have led to strong outcomes over the long term, inclusive of the impact of short-term market disruptions such as the great financial crisis and the coronavirus pandemic.
Strong Performance Continued When Looking at Risk-Adjusted Returns
Looking deeper into its risk-adjusted performance, the T. Rowe Price Target 2025 Fund has consistently outperformed peers since its inception in 2013, registering an above-median Sharpe ratio rank in 100% of rolling five-year periods since inception. During those periods, the average Sharpe ratio rank is 23.
T. Rowe Price Target 2025 Fund vs. Morningstar Fund Target-Date 2025 Category
As of 9/30/2024
| Hit Rate* | Average Percentile* | |
|---|---|---|
| Rolling 5-Year Sharpe Ratio (SI) | 100% | 23 |
* Shown from first full month-end following investor class inception, August 31, 2013.
Source: Morningstar Direct as of 9/30/2024.
Hit Rate is used here to refer to the percentage of rolling periods the fund generated a higher Sharpe ratio compared to its index.
The Sharpe Ratio is a common measure used to help understand an investment’s return relative to the risk it takes. When compared to similar products or portfolios a higher ratio is viewed as positive. A lower ratio may indicate a less desirable risk/return relationship.
What Makes Us Different?
Ultimately, the Target Series portfolios are designed to help accumulate retirement assets with reduced volatility near and at the point of retirement. We execute on this goal through thoughtful portfolio construction with diversified equity and fixed income building blocks, underlying active management backed by industry-leading research platforms, and active tactical adjustments to take advantage of shorter-term market dislocations.
Our process has generated strong results for the T. Rowe Price Target 2025 Fund. Despite being underweight equity relative to the S&P Target Date 2025 Index for the life of the fund, our real-dollar outcome has been in line with the index.
For standardized returns and other information about the fund, click here.
Performance data quoted represents past performance and is not a reliable indicator of future performance. Investment return and principal value will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. To obtain the most recent month-end performance, please click here.
Chart shows growth of 100,000 USD invested in the T. Rowe Price Target 2025 Fund and the S&P Target Date 2025 Index on August 31, 2013.
Figures include changes in principal value with dividends reinvested. The 2025 vintage is shown for illustrative purposes to represent a portfolio at target retirement. Investors cannot invest directly in an index.
Source: S&P Indices. See Additional Disclosures for more information on the source.
Importantly, this performance held true during a period of strong equity markets when equities significantly outperformed their fixed income counterparts. We also delivered these strong results with lower volatility relative to the index. This gives us a lot of comfort in our overall design and our ability to generate excess performance through active management.
At T. Rowe Price, we believe retirement investors should remain focused on their long-term goals. Investing in the T. Rowe Price target date portfolios offers a disciplined strategy designed to help investors reach their destination in the long run, despite short-term market volatility along the way. For more information on how we can help investors remain focused on their long-term goals, please contact your T. Rowe Price representative.
Standardized Performance
As of September 30, 2024
| Annualized Returns | 1 year | 3 years | 5 years | 10 years | Since Inception (8-31-2013) |
|---|---|---|---|---|---|
| Target 2025 Fund (Investor Class) | 18.40% | 2.99% | 6.82% | 6.29% | 6.77% |
| S&P Target 2025 Index | 19.81% | 4.09% | 7.01% | 6.55% | 6.94% |
Performance data quoted represents past performance and is not a reliable indicator of future performance. Investment return and principal value will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. To obtain the most recent month-end performance, visit troweprice.com.
As of June 1, 2024, the gross expense ratio for the T. Rowe Price Target 2025 Fund is 0.51%.
Important information about for the Morningstar Quantitative Ratings
*I Class shares may not be available to all investors.
The Morningstar Medalist RatingTM is the summary expression of Morningstar’s forward-looking analysis of investment strategies as offered via specific vehicles using a rating scale of Gold, Silver, Bronze, Neutral, and Negative. The Medalist Ratings indicate which investments Morningstar believes are likely to outperform a relevant index or peer group average on a risk-adjusted basis over time. Investment products are evaluated on three key pillars (People, Parent, and Process) which, when coupled with a fee assessment, forms the basis for Morningstar’s conviction in those products’ investment merits and determines the Medalist Rating they’re assigned. Pillar ratings take the form of Low, Below Average, Average, Above Average, and High. Pillars may be evaluated via an analyst’s qualitative assessment (either directly to a vehicle the analyst covers or indirectly when the pillar ratings of a covered vehicle are mapped to a related uncovered vehicle) or using algorithmic techniques. Vehicles are sorted by their expected performance into rating groups defined by their Morningstar Category and their active or passive status. When analysts directly cover a vehicle, they assign the three pillar ratings based on their qualitative assessment, subject to the oversight of the Analyst Rating Committee, and monitor and reevaluate them at least every 14 months. When the vehicles are covered either indirectly by analysts or by algorithm, the ratings are assigned monthly. For more detailed information about these ratings, including their methodology, please go to global.morningstar.com/managerdisclosures/.
The Morningstar Medalist Ratings are not statements of fact, nor are they credit or risk ratings. The Morningstar Medalist Rating (i) should not be used as the sole basis in evaluating an investment product, (ii) involves unknown risks and uncertainties which may cause expectations not to occur or to differ significantly from what was expected, (iii) are not guaranteed to be based on complete or accurate assumptions or models when determined algorithmically, (iv) involve the risk that the return target will not be met due to such things as unforeseen changes in management, technology, economic development, interest rate development, operating and/or material costs, competitive pressure, supervisory law, exchange rate, tax rates, exchange rate changes, and/or changes in political and social conditions, and (v) should not be considered an offer or solicitation to buy or sell the investment product. A change in the fundamental factors underlying the Morningstar Medalist Rating can mean that the rating is subsequently no longer accurate.
©2024 Morningstar, Inc. All rights reserved. The information contained herein: (1) is proprietary to Morningstar and/or its content providers; (2) may not be copied or distributed; and (3) is not warranted to be accurate, complete, or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information. Past performance is no guarantee of future results.
The trademarks shown are the property of their respective owners. Use does not imply endorsement, sponsorship, or affiliation of T. Rowe Price with any of the trademark owners.
Important Information
This material is provided for general and educational purposes only and 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, nor is it intended to serve as the primary basis for investment decision-making.
S&P Target Date 2025 Index is designed to represent asset class exposure for glide path products with target dates up to 2025. Investors cannot invest directly in an index.
The fund may have other share classes available that offer different investment minimums and fees. See the prospectus for details. Data shown are for the T. Rowe Price Target 2025 Fund, Investor Class. The 2025 vintage is shown for illustrative purposes to represent a portfolio at target retirement.
The fund’s total return figures reflect the reinvestment of dividends and capital gains, if any.
The principal value of the Target Funds is not guaranteed at any time, including at or after the target date, which is the approximate year an investor plans to retire (assumed to be age 65) and likely stop making new investments in the fund. If an investor plans to retire significantly earlier or later than age 65, the funds may not be an appropriate investment even if the investor is retiring on or near the target date. The funds’ allocations among a broad range of underlying T. Rowe Price stock and bond funds will change over time. The funds emphasize potential capital appreciation during the early phases of retirement asset accumulation, balance the need for appreciation with the need for income as retirement approaches, and focus on supporting an income stream over a long-term postretirement withdrawal horizon. The funds are not designed for a lump-sum redemption at the target date and do not guarantee a particular level of income. The funds maintain a substantial allocation to equities both prior to and after the target date, which can result in greater volatility over shorter time horizons.
S&P Indices are products of S&P Dow Jones Indices LLC, a division of S&P Global, or its affiliates (“SPDJI”), and have been licensed for use by T. Rowe Price. Standard & Poor’s® and S&P® are registered trademarks of Standard & Poor’s Financial Services LLC, a division of S&P Global (“S&P”); Dow Jones® is a registered trademark of Dow Jones Trademark Holdings LLC (“Dow Jones”) and these trademarks have been licensed for use by SPDJI and sublicensed for certain purposes by T. Rowe Price. The fund is not sponsored, endorsed, sold or promoted by SPDJI, Dow Jones, S&P, their respective affiliates, and none of such parties make any representation regarding the advisability of investing in such product(s) nor do they have any liability for any errors, omissions, or interruptions of the S&P Indices.
Consider the investment objectives, risks, and charges and expenses carefully before investing. For a prospectus or, if available, a summary prospectus containing this and other information, call 1-800-564-6958. Read it carefully.
202405-3557725
