T. ROWE PRICE PUBLISHES WHITE PAPER ON THE SUCCESS OF DEFINED CONTRIBUTION PLANS AND THE FUTURE OF RETIREMENT

Rhea-AI Summary

T. Rowe Price has published a white paper commemorating the 50th anniversary of the Employee Retirement Income Security Act (ERISA) and its impact on retirement savings in America. The paper highlights the success of defined contribution (DC) plans and their future potential. Key insights include:

• DC plans and IRAs account for 63% of the $40 trillion in U.S. retirement market assets
• DC plans have expanded access, increased participation and savings rates, and provided diversified investments
• Auto-enrollment features significantly enhance participation rates (83% vs. 36% without)
• Over 75% of middle-income families' liquid financial assets are in retirement accounts
• Combination of employer-sponsored plans and Social Security can meaningfully replace income in retirement

The paper also emphasizes the need for continued improvements in auto-features adoption, addressing savings disparities, and delivering personalized solutions to enhance retirement outcomes for all Americans.

Positive

• DC plans and IRAs account for 63% of the $40 trillion U.S. retirement market assets
• Retirement plans with auto-enrollment have an 83% participation rate compared to 36% without
• Over 75% of middle-income families' liquid financial assets are invested in retirement accounts
• T. Rowe Price's leadership position in the retirement industry

Negative

• None.

Insights

Financial Analyst

The publication of T. Rowe Price's white paper on the 50th anniversary of ERISA is not a market-moving event but offers valuable insights into the evolution of retirement savings in the U.S. The paper highlights the significant growth of defined contribution plans, now representing 63% of the $40 trillion U.S. retirement market assets.

Key takeaways include the effectiveness of auto-enrollment, with participation rates of 83% compared to 36% without it. This data suggests potential for further growth in retirement assets if more employers adopt these features. The concentration of middle-income families' liquid assets in retirement accounts (75%+) underscores the importance of these plans for financial stability.

While not directly impacting T. Rowe Price's stock, this research positions the company as a thought leader in the retirement industry, potentially enhancing its reputation and client relationships in the long term.

Retirement Policy Expert

The white paper's release coinciding with ERISA's 50th anniversary showcases the remarkable progress in retirement savings, but also highlights areas for improvement. The success of auto-features in boosting participation rates presents a clear policy direction for enhancing retirement security.

However, the paper also points to ongoing challenges, including the need to protect Social Security, develop effective retirement income solutions and address savings barriers. These issues suggest potential future policy developments that could significantly impact the retirement landscape.

The emphasis on personalized solutions and addressing racial and gender savings disparities indicates a shift towards more inclusive retirement policies. This trend could lead to new regulations or incentives aimed at broadening retirement plan access and improving outcomes for underserved populations, potentially creating both opportunities and challenges for retirement plan providers and employers.

Commemorating 50 years of the Employee Retirement Income Security Act and its impact on retirement savings in America

BALTIMORE, Sept. 12, 2024 /PRNewswire/ -- T. Rowe Price, a global investment management firm and a leader in retirement, today published a new white paper to mark the 50^th anniversary of the Employee Retirement Income Security Act of 1974 (ERISA). The paper explores how defined contribution (DC) plans have improved the retirement savings landscape in America in the ERISA era and ways that DC plans can continue to support the evolving and diverse needs of retirement savers.

"Today, industry leaders, lawmakers and policy influencers gathered in Washington D.C. to celebrate 50 years of ERISA," said Sudipto Banerjee, director of retirement thought leadership at T. Rowe Price, author of the white paper, and speaker at today's event. "It was an incredible honor to speak at the ERISA symposium among fellow retirement leaders. Reflecting on the strong foundation ERISA has laid for retirement savings and discussing how we can build on its success was both inspiring and vital. Together, we can guide even more savers toward better retirement outcomes."

Key insights from The Success of Defined Contribution Plans and the Road Ahead include:

• According to the Investment Company Institute, today, defined contribution plans across the private sector, government agencies, and non-profits, along with IRAs, account for 63% of the $40 trillion in U.S. retirement market assets
• Defined contribution plans have expanded retirement plan access and participation, increased savings rates, and provided diversified investments for U.S. workers
• Wider adoption of auto-features, such as automatic enrollment, reenrollment, and auto escalation, could significantly enhance participation and outcomes. According to T. Rowe Price data, retirement plans with auto-enrollment have an 83% participation rate compared to 36% for plans without it
• According to data from the Survey of Consumer Finances, more than three-quarters of total liquid financial assets of middle-income families are invested in retirement accounts
• American workers can meaningfully replace their income in retirement through the combination of employer-sponsored retirement savings plans and Social Security
• Protecting Social Security, delivering retirement income solutions, and addressing savings barriers for workers could also improve the retirement system

"As a leader in retirement, T. Rowe Price recognizes the important role we have in driving positive change and innovation in the retirement industry," said Michael Davis, head of global retirement strategy at T. Rowe Price. "Defined contribution plans have become the vital force behind a secure retirement for most U.S. workers, and while ERISA has laid a strong foundation for retirement savings in America, the work is not yet done. By focusing on adoption of effective auto-features, addressing racial and gender savings disparities, and delivering personalized solutions for workers, we can continue to improve retirement coverage and outcomes for all Americans."

ABOUT T. ROWE PRICE

Founded in 1937, T. Rowe Price (NASDAQ – GS: TROW) helps individuals and institutions around the world achieve their long-term investment goals. As a large global asset management company known for investment excellence, retirement leadership, and independent proprietary research, the firm is built on a culture of integrity that puts client interests first. Clients rely on the award-winning firm for its retirement expertise and active management of equity, fixed income, alternatives, and multi-asset investment capabilities. T. Rowe Price serves millions of clients globally and manages US $1.61 trillion in assets under management as of August 30, 2024. About two-thirds of the assets under management are retirement-related. News and other updates can be found on Facebook, Instagram, LinkedIn, X, YouTube, and troweprice.com/newsroom.

View original content:https://www.prnewswire.com/news-releases/t-rowe-price-publishes-white-paper-on-the-success-of-defined-contribution-plans-and-the-future-of-retirement-302246952.html

SOURCE T. Rowe Price Group

FAQ

What percentage of U.S. retirement market assets are in defined contribution plans and IRAs according to T. Rowe Price's white paper (TROW)?

According to T. Rowe Price's white paper, defined contribution plans and IRAs account for 63% of the $40 trillion in U.S. retirement market assets.

How does auto-enrollment impact participation rates in retirement plans according to T. Rowe Price (TROW)?

T. Rowe Price data shows that retirement plans with auto-enrollment have an 83% participation rate compared to 36% for plans without it, demonstrating a significant positive impact on participation rates.

What percentage of middle-income families' liquid financial assets are invested in retirement accounts according to T. Rowe Price's white paper (TROW)?

According to data cited in T. Rowe Price's white paper, more than three-quarters (over 75%) of total liquid financial assets of middle-income families are invested in retirement accounts.

What are the key areas T. Rowe Price (TROW) suggests for improving retirement outcomes in their 2024 white paper?

T. Rowe Price suggests focusing on adoption of effective auto-features, addressing racial and gender savings disparities, and delivering personalized solutions for workers to improve retirement coverage and outcomes for all Americans.