Speaking at a press briefing on Tuesday in New York City,
Christine Fahlund, a senior financial planner at T. Rowe Price, said the
company revisited its research and determined that the funds are “still on
track.” T. Rowe’s target-date funds have a 65-year-old in about 55%
equities, which is a riskier allocation than some competitors.
Fahlund said she still believes in having equities at retirement, and advocates
that retirees stay flexible with retirement dates and what they do in
retirement. With “too much cash there’s no return,” Fahlund said.
Although participants high in equity at their retirement date risk a
significant loss (such as the last year), she contended they can see a worse
result just from an unexpected expense in retirement. “We almost have to
put on the blinders to what the market’s going to do,” she said.
As far as tackling retirement income, there is no silver bullet to a specific product solution, Egan said. T. Rowe is continuing to analyze and look at features such as a guaranteed minimum withdrawal benefit (GMWB), but they see “very little interest amongst plan sponsors” for annuitization, she said. “We just at the moment don’t see an enormous appetite; when you think about it, it’s an enormous fiduciary responsibility.”
Participants Hold Their Ground
T. Rowe Price saw most participants didn’t make changes during the downturn. Participation rates did not drop off and have even increased slightly. Outstanding loans and hardship withdrawals did not see significant increases. "We’re not seeing the 401(k) being use as an ATM," said Egan.
Furthermore, while there was a lot of conversation from participants, there wasn’t a lot of activity, said Egan, noting that 96% of participants did nothing to their accounts. Of the 4% of participants who did make transactions, most did transfer their money to more conservative assets.