T. Rowe Price Group, Inc. · NASDAQ:TROW
T. Rowe Price — Earnings Presentation (December 2023)
68 slides from T. Rowe Price's earnings presentation, December 2023
Slide 1: Retirement Spending: Revolutionize Your Thinking
Retirement Spending: Revolutionize Your Thinking Retirees are thinking differently about retirement spending. Are you? PresenterName Bold, PresenterTitle Unbold Event Date T. R O W E P R I C E 1
Slide 2: What we'll cover
What we’ll cover Different Conventional Mapping Preferences Wisdom vs. Preferences Retiree Spending to Solutions T. R O W E P R I C E 2
Slide 3: Different Preferences
Different Conventional Mapping Preferences Wisdom vs. Preferences Retiree Spending to Solutions T. R O W E P R I C E 3
Slide 4: The Year Was 1781...
THE YEAR WAS 17871...
Slide 5: Continental Army and local militia
Continental Army and local militia Photo Source: Guilford Courthouse National Military Park, National Park Service (NPS), https://www.nps.gov/guco/learn/historyculture/patriot-soldiers.htm T. R O W E P R I C E 5
Slide 6: Guilford Courthouse battle plan
Guilford Courthouse battle plan Photo Source: Guilford Courthouse National Military Park, National Park Service (NPS), https://www.nps.gov/carto/hfc/carto/media/GUCOmap1.jpg T. R O W E P R I C E 6
Slide 7: Guilford Courthouse battle plan
Guilford Courthouse battle plan Photo Source: Guilford Courthouse National Military Park, National Park Service (NPS), https://www.nps.gov/carto/hfc/carto/media/GUCOmap1.jpg T. R O W E P R I C E 7
Slide 8: Guilford Courthouse battle plan
Guilford Courthouse battle plan Photo Source: Guilford Courthouse National Military Park, National Park Service (NPS), https://www.nps.gov/carto/hfc/carto/media/GUCOmap1.jpg T. R O W E P R I C E 8
Slide 9: Retirement spending
Retirement spending § Conventional wisdom assumes one behavioral approach § Most strategies are designed for that one outcome § But different retirees have different preferences § Retirement planning should be flexible T. R O W E P R I C E 9
Slide 10: Conventional Wisdom: The Spenders
Conventional Wisdom: THE SPENDERS Adjust their balance to maintain their spending T. R O W E P R I C E 10
Slide 11: The Retirement Revolutionaries: The Savers
The Retirement Revolutionaries: THE SAVERS T. R O W E P R I C E 11
Slide 12: The Savers
The Retirement Revolutionaries: THE SAVERS Adjust their spending to maintain their balance! T. R O W E P R I C E 12
Slide 13: The Retirement Revolutionaries: The Savers
The Retirement Revolutionaries: The Savers T. R O W E P R I C E 13
Slide 14: The Retirement Revolutionaries: The Savers
The Retirement Revolutionaries: The Savers Nearly 6 in 10 retirees say they want to maintain or even grow their assets in retirement.1 1T. Rowe Price Retirement Savings and Spending Study (2020), Question 80, Table 194-1 and Lucas, Lori, Why Do People Spend the Way They Do in Retirement? Findings Fr
Slide 15: The Retirement Revolutionaries: The Savers
The Retirement Revolutionaries: The Savers ⅓ Nearly 6 in 10 retirees say For one-third of retirees, they want to maintain or compared with balance at even grow their assets in retirement: retirement.1 – 20 years in, balance was higher. – At death, balance was the same.2 1 T. Rowe Price Retirement Sa
Slide 16: The Retirement Revolutionaries: The Savers
The Retirement Revolutionaries: The Savers ⅓ Nearly 6 in 10 retirees say For one-third of retirees, Market decline:3 they want to maintain or compared with balance at – Only 8% would use savings even grow their assets in retirement: to maintain spending. retirement.1 – 20 years in, balance – 27% wou
Slide 17: The Retirement Revolutionaries: The Savers
The Retirement Revolutionaries: The Savers Almost three of four 65- to 69-year-olds make no withdrawals from their retirement accounts. Source: Poterba, James, Steven Venti, and David Wise, The Drawdown of Personal Retirement Assets: Husbanding or Squandering?, National Bureau of Economic Research (
Slide 18: The Retirement Revolutionaries: The Savers
The Retirement Revolutionaries: The Savers Almost three of four 65- to 69-year-olds make no withdrawals from their retirement accounts. In 2009, when RMDs were suspended, about ⅓ chose not to take them. Source: Poterba, James, Steven Venti, and David Wise, The Drawdown of Personal Retirement Assets:
Slide 19: The Retirement Revolutionaries: The Savers
The Retirement Revolutionaries: The Savers Almost three of four 65- to 69-year-olds make no withdrawals from their retirement accounts. In 2009, when RMDs were suspended, about ⅓ chose not to take them. About one-third of IRA withdrawals are saved in another account. Source: Poterba, James, Steven V
Slide 20: Retiree Spenders vs. Savers
Retiree Spenders vs. Savers Fit the conventional wisdom of spending in retirement. Draw down their Spenders balance to maintain their spending. T. R O W E P R I C E 20
Slide 21: Retiree Spenders vs. Savers
Retiree Spenders vs. Savers Fit the conventional Don’t follow wisdom of spending conventional wisdom. in retirement. Draw down their Spenders Savers Adjust their level of balance to maintain spending to preserve their spending. their balance. T. R O W E P R I C E 21
Slide 22: Retiree Spenders vs. Savers
Retiree Spenders vs. Savers Fit the conventional wisdom of spending 30% 70% Don’t follow conventional wisdom. in retirement. Draw down their Spenders Savers Adjust their level of balance to maintain spending to preserve their spending. their balance. Source: T. Rowe Price Retirement Savings and Spen
Slide 23: Conventional Wisdom vs. Retiree Spending
Different Conventional Mapping Preferences Wisdom vs. Preferences Retiree Spending to Solutions T. R O W E P R I C E 23
Slide 24: Conventional Wisdom
CONVENTIONAL WISDOM
Slide 25: Spending at retirement
Spending at retirement 100% 90% 80% 70% 60% Spend the same 50% 80%-120% 40% 30% 20% 10% 0% T. R O W E P R I C E 25
Slide 26: Spending through retirement
Spending through retirement Retirement Spending $120,000 $120,000 Conventional Spending Increases by $100,000 Inflation Rate $80,000 $60,000 $40,000 $20,000 $0 65 70 75 80 85 90 95 Age T. R O W E P R I C E 26
Slide 27: Actual Retiree Spending
ACTUAL RETIREE SPENDING
Slide 28: Spending at retirement
Spending at retirement 100% 100% Spend 90% 90% more 80% 80% >120% 70% 70% 60% Spend the 60% Spend the same same 50% 80%-120% 50% 80%-120% 40% 40% 30% 30% Spend less 20% 20% <80% 10% 10% 0% 0% 1–2 Years 3–4 Years 5–6 Years Banerjee, Sudipto, Change in Household Spending After Retirement: Results from
Slide 29: Spending through retirement
Spending through retirement Retirees increase their spending by 2% less than Conventional each year Retirement Spending $120,000 $120,000 Conventional Spending Increases by $100,000 Inflation Rate $80,000 $67,000 $60,000 Banerjee Spending Increases by $40,000 2% Less Than Conventional $20,000 $0 65
Slide 30: Real spending (adjusted for inflation)
Real spending (adjusted for inflation) $100,000 $80,000 $60,000 Household Spends $50,000 Annually $40,000 $20,000 $0 65 70 75 80 85 90 Age T. R O W E P R I C E 30
Slide 31: Real spending (adjusted for inflation)
Real spending (adjusted for inflation) $100,000 $80,000 $60,000 Household Spends $50,000 Annually $40,000 Real Spending $20,000 Decreases Each Year $0 65 70 75 80 85 90 Age Source: Banerjee, Sudipto, Decoding Retiree Spending, T. Rowe Price Insights on Retirement, T. Rowe Price Group, Inc., March 20
Slide 32: Household Net Worth
HOUSEHOLD NET WORTH T. R O W E P R I C E 32
Slide 33: Real spending (adjusted for inflation)
Real spending (adjusted for inflation) $100,000 $80,000 $60,000 Household Spends $50,000 Annually $40,000 Real Spending $20,000 Decreases Each Year $0 65 70 75 80 85 90 Age Source: Banerjee, Sudipto, Decoding Retiree Spending, T. Rowe Price Insights on Retirement, T. Rowe Price Group, Inc., March 20
Slide 34: Real spending (adjusted for inflation)
Real spending (adjusted for inflation) $100,000 $80,000 $60,000 2% $40,000 All Retirees $20,000 $0 65 70 75 80 85 90 Age Source: Banerjee, Sudipto, Decoding Retiree Spending, T. Rowe Price Insights on Retirement, T. Rowe Price Group, Inc., March 2021 analysis of Health and Retirement Study, public u
Slide 35: Real spending (adjusted for inflation)
Real spending (adjusted for inflation) $100,000 2.7 $80,000 % $60,000 2% High Net Worth $40,000 All Retirees $20,000 $0 65 70 75 80 85 90 Age Source: Banerjee, Sudipto, Decoding Retiree Spending, T. Rowe Price Insights on Retirement, T. Rowe Price Group, Inc., March 2021 analysis of Health and Retir
Slide 36: Real spending (adjusted for inflation)
Real spending (adjusted for inflation) $100,000 2.7 $80,000 % $60,000 2% High Net Worth $40,000 All Retirees $20,000 Low Net Worth 0.3% $0 65 70 75 80 85 90 Age Source: Banerjee, Sudipto, Decoding Retiree Spending, T. Rowe Price Insights on Retirement, T. Rowe Price Group, Inc., March 2021 analysis
Slide 37: Retiree spending
Retiree spending Retirees group these expenses together Housing Foundational Transportation Five Health Care Food Clothing Source: U.S. Bureau of Labor Statistics, Consumer Expenditure Survey, 2022, Table 1300. Age of reference person: Average annual expenditures and characteristics. T. R O W E P R
Slide 38: Real spending (adjusted for inflation)
Real spending (adjusted for inflation) $100,000 $80,000 $60,000 $40,000 All Retirees $20,000 $0 65 70 75 80 85 90 Age Source: Banerjee, Sudipto, Decoding Retiree Spending, T. Rowe Price Insights on Retirement, T. Rowe Price Group, Inc., March 2021 analysis of Health and Retirement Study, public use
Slide 39: Real spending (adjusted for inflation)
Real spending (adjusted for inflation) $100,000 $80,000 $60,000 $40,000 Total Spending $20,000 $0 65 70 75 80 85 90 Age Source: Banerjee, Sudipto, Decoding Retiree Spending, T. Rowe Price Insights on Retirement, T. Rowe Price Group, Inc., March 2021 analysis of Health and Retirement Study, public us
Slide 40: Real spending (adjusted for inflation)
Real spending (adjusted for inflation) $100,000 $80,000 $60,000 $40,000 Total Spending $20,000 Foundational Five Everything Else $0 65 70 75 80 85 90 Age Source: Banerjee, Sudipto, Decoding Retiree Spending, T. Rowe Price Insights on Retirement, T. Rowe Price Group, Inc., March 2021 analysis of Heal
Slide 41: Income
INCOME
Slide 42: "Income": Conventional wisdom
“Income”: Conventional wisdom Interest Dividends Wages from RMDs Withdrawals from working retirement and taxable accounts Sources: T. Rowe Price Retirement Savings and Spending Study (2020), Question 15, Table 189-1 and Lucas, Lori, Why Do People Spend the Way They Do in Retirement? Findings From EB
Slide 43: "Income": Actual retirees
“Income”: Actual retirees Social Security Pension Annuities Source: Banerjee, Sudipto, Decoding Retiree Spending, T. Rowe Price Insights on Retirement, T. Rowe Price Group, Inc., March 2021 analysis of Health and Retirement Study, public use dataset. Produced and distributed by the University of Mic
Slide 44: Retirees adapt spending to their steady income
Retirees adapt spending to their steady income 2.0 1.8 The Ratio of Foundational Five Spending to Steady Income 1.6 1.4 1.2 Foundational Five 1.0 0.8 Steady Income 0.6 0.4 0.2 0.0 65 70 75 80 85 90 Age Source: Banerjee, Sudipto, Decoding Retiree Spending, T. Rowe Price Insights on Retirement, T. Row
Slide 45: Let's talk pensions: Assets after 18 years
Let’s talk pensions: Assets after 18 years With pension Without pension Assets dropped Assets dropped 4% 34% Source: Banerjee, Sudipto, Asset Decumulation or Asset Preservation? What Guides Retirement Spending?, Employee Benefits Research Institute (EBRI), Issue Brief, April 3, 2018, No. 447, pg. 10
Slide 46: Let's talk pensions
Let’s talk pensions Percentage of families age 32–61 with DB plan 45% 41% 40% (1989) 35% 30% 19% (2016) 25% 20% 15% 10% 5% 0% 1989 1992 1995 1998 2001 2004 2007 2010 2013 2016 Source: Morrissey, Monique, The State of American Retirement Savings, Economic Policy Institute, December 10, 2019, Chart 2,
Slide 47: Saver Behavior
SAVER BEHAVIOR T. R O W E P R I C E 47
Slide 48: Potential saver motivators
Potential saver motivators Rational Psychological Behavioral T. R O W E P R I C E 48
Slide 49: Rational
Rational Specific Goal § Medical/Nursing home bills § Leave it to the kids § Leave it to charity T. R O W E P R I C E 49
Slide 50: Rational
Rational Specific Goal Unknown Goal § Medical/Nursing home bills § Unsure what a safe spending rate is § Leave it to the kids § Provides options for future spending § Leave it to charity § “Just in case” something bad happens T. R O W E P R I C E 50
Slide 51: Psychological
Psychological Satisfaction From the Balance Itself § Utility theory/Wealth Depletion Aversion § Balance improves feeling of financial well-being and life satisfaction T. R O W E P R I C E 51
Slide 52: Psychological
Psychological Satisfaction From Comparison the Balance Itself § Higher balance = more successful § Utility theory/Wealth Depletion Aversion § Balance improves feeling of financial well-being and life satisfaction T. R O W E P R I C E 52
Slide 53: Behavioral
Behavioral Habit § Used to a lifestyle that moderates spending § More conscientious/biased toward the balance T. R O W E P R I C E 53
Slide 54: Behavioral
Behavioral Habit Changing Preferences § Used to a lifestyle that moderates spending § More conscientious/biased toward the balance T. R O W E P R I C E 54
Slide 55: Preferences change: Frugality increases in retirement
Preferences change: Frugality increases in retirement While Working Current 50% 48% 45% 44% 40% 35% 34% 30% 25% 25% 22% 20% 15% 10% 10% 8% 5% 5% 5% 1% 0% Very Willing Spender Willing Spender Average Spender Frugal Very Frugal Source: Lucas, Lori, Why Do People Spend the Way They Do in Retirement? Fi
Slide 56: Mapping Preferences to Solutions
Different Conventional Mapping Preferences Wisdom vs. Preferences Retiree Spending to Solutions T. R O W E P R I C E 56
Slide 57: Uncovering preferences
Uncovering preferences § Use What’s Your Spender/Saver Score? – Combines demographic indicators with expressed preferences § Read Decoding Retiree Spending Spender/Saver Tool Decoding Retiiree Spending T. R O W E P R I C E 57
Slide 58: Reconsider what it takes to make someone happy
Reconsider what it takes to make someone happy § Always have the exact same lifestyle? § Always buy the same goods and services? § Always spend the same (real) amount of money? § It changes! T. R O W E P R I C E 58
Slide 59: Applying preferences
Applying preferences Spending Investing T. R O W E P R I C E 59
Slide 60: Applying preferences
Applying preferences § Communicating § Planning discussions should cover financial and emotional aspects § Align wording to what they want to hear (income vs. balance; spending vs. saving) T. R O W E P R I C E 60
Slide 61: Charles the Spender
Charles the Spender § Focus is on using his money to maintain his spending § Communicate in a way that connects back to his spending preference – Describe solutions in terms of how they could support his spending – Talk about how much his income might be T. R O W E P R I C E 61
Slide 62: Catherine the Saver
Catherine the Saver § Focus is on maintaining her balance for the future § Communicate in a way that connects back to her saving preference – Describe solutions in terms of how they could support her balance – Talk about how her balance will be sustained T. R O W E P R I C E 62
Slide 63: Resources
Resources Decoding Retiree What’s Your Visualize Retirement Conversation Spending Spender/Saver Program Starters Score? T. R O W E P R I C E 63
Slide 64: How It All Turned Out...
HOW IT ALL TURNED OUT...
Slide 65: After Battle of Guilford Courthouse...Yorktown
After Battle of Guilford Courthouse...Yorktown Photo Source: Yorktown Battlefield, National Park Service (NPS), https://www.nps.gov/carto/hfc/carto/media/YONBmap2.jpg T. R O W E P R I C E 65
Slide 66: Retirement planning lessons
Retirement planning lessons Recognize that Determine what those Pursue solutions that different people have preferences are. are in line with those different preferences. preferences. T. R O W E P R I C E 66
Slide 67: Important information
Important information This material, including any statements, information, data, and content contained within it and any materials, information, images, links, graphics, or recording provided in conjunction with this material are being furnished by T. Rowe Price for general informational purposes o
Slide 68: Thank You
THANK YOU CCON0164323 202312-3175225
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