T. Rowe Price Retirement 2040 TRRDX

On June 28, 2023, T. Rowe Price announced upcoming changes to its target-date lineup, including T. Rowe Price Retirement. The changes affect neither the strategy’s High People Pillar rating nor its High Process rating. Starting in 2023’s third quarter, management will add Hedged Equity and Dynamic Credit as building blocks to the target-date strategy’s glide path and will gradually increase the funds’ allocations until they reach the new target allocation. T. Rowe Price has a strong record of introducing and implementing enhancements to the glide path. The updates seek to address potential downside risk and volatility for investors at or near the retirement stage. The Hedged Equity fund’s allocation will peak at the retirement date; it’s expected to make up 5.5% of the portfolio. The Hedged Equity strategy has been a separate account since 2021, and it will launch as a mutual fund in July 2023. Adding newly launched funds to a target-date lineup isn’t considered best practice, but the firm’s dedication to enhancements and research-based approach helps balance some concern. The Dynamic Credit fund, which was incepted in 2019, has a target allocation of 1.4% at the retirement date, but will steadily increase to a maximum of 2.3% at the end of the glide path. The changes are applicable to both the mutual fund and collective investment trust versions of the series. The firm also announced the upcoming merger of the Retirement I Fund series into a new I Class of the existing Retirement Fund series. This would align them with competitors in the target-date industry that offer multiple share classes rather than multiple fund series. The change is expected to take place in February 2024 and is being managed to minimize negative tax implications for those that hold the series in a taxable account.