In the Loop

Insights on retirement income, personalization, and diversification

January 25 2024
Transcript

Gillian Kemmerer
Anchor, Asset TV 

Welcome, I'm Gillian Kemmerer, and today we're joined by Michael Davis, head of Global Retirement Strategy at T. Rowe Price. Michael, it's a pleasure to have you here in studio today. 

Michael Davis

Great to be here. 

Gillian Kemmerer

So T. Rowe Price just released its third U.S. Retirement Market Outlook. So what are you trying to accomplish with this work, and who does it serve? 

Michael Davis

Really happy to have this conversation with you today and to have this conversation with the marketplace around key retirement themes that we think are important. What we hope to achieve with it is to be a part of a more robust national dialogue around retirement activity, around retirement trends or retirement policy. We think we have a stake in this argument. The firm, just back up for a second, founded in 1937, based in Baltimore, Maryland, we manage $1.2 trillion. Two-thirds of the assets we manage are retirement-related assets. So, in addition to that, we also recordkeep for over 2 million participants across the country. And we engage with a variety of different retirement buyer types—from plan sponsors to advisors to consultants to individuals—and we think all those insights and all the research we do as a result of all of those engagements gives us the insights that sort of give us that stake in this discussion. We also think that by being a part of the discussion, hopefully we can advance the discussion in a way that benefits retirement savers nationwide. We think that our voice, that research, can help power those discussions in a way that's helpful to people and advances their retirement savings objectives across the country. So we think it is really important. 

Gillian Kemmerer

And what are the three biggest trends that you see taking place in the retirement industry today? 

Michael Davis

Great question. First, I'd say retirement income. Retirement income is becoming a much more dominant theme in the retirement marketplace, largely because a lot of the people that have amassed savings over decades are now starting to retire. So, a lot of people may or may not know, but the DC system in the United States is the oldest in the world. Those provisions came into the tax code in 1978. So a lot of people have been amassing savings for decades. And as they start to roll that money out of the system the question is: How do they do it? How they do it most effectively? Right? So historically, we've talked a lot about accumulation. Now the conversation is expanding to decumulation. How do you take the money out in a way that gives those assets some kind of longevity to carry you through your retirement years the best way that they can? So that would be a big part of the conversation we have in terms of what we're seeing in terms of preferences and trends.

The second major theme we'll talk about is personalization. How do you have a conversation that meets people where they are in terms of how they want to save for themselves, and what's going to benefit them the most in the retirement system. So, as we think about this conversation, it really is about customized discussion, customized communication, being able to sort of leverage data in ways that sort of drive that ability to have these individualized conversations. Again, decumulation in retirement income is a driver of this need for personalization, because people want to take the money out in ways that are very unique to them. It’s very idiosyncratic, right? So this personalization, we think, is going to be a theme that will play out for years. 

It also has elements of diversity, equity, and inclusion because different demographic groups may save and spend in different ways. And is there a conversation that we should have as an industry with respect to how we want to communicate with those different demographic groups that, again, meet them where they are. 

The final theme we'll talk about is diversification. There's a much bigger conversation underway in the marketplace around having a much more diversified set of savings assets, particularly with respect to target date funds. And having these diversified assets help to carry you through challenges like inflation, or if certain asset classes correlate more over time and don't give you the kind of sort of diversification benefit that you want, are there other asset classes or asset types that you should use to mollify potential volatility that you might experience in your portfolio. And again, give you the kind of confidence that as you march into retirement, those assets are going to be there working for you.

So diversification we think is a big theme and we think it’s going to encourage a lot of asset managers to think a lot more critically about the way they build and construct portfolios. We certainly have given thought to that at T. Rowe Price, and we expect that the marketplace will do the same thing. 

Gillian Kemmerer

Michael, this is incredibly important work. I know that you and your team put a lot of effort into it. So thank you. Congratulations on the launch, and we appreciate you taking the time to share the top-level points with us. 

Michael Davis

Thank you so much.  

Head of Global Retirement Strategy Michael Davis introduces our retirement market outlook for 2024 and the primary themes we’re watching: retirement income solutions to satisfy broad participant needs, tailored experiences to help drive better retirement outcomes, and diversification investment strategies to weather all market environments.

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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. Past performance is not a reliable indicator of future performance. The value of an investment and any income from it can go down as well as up. Investors may get back less than the amount invested.​

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