Personalized Solutions Could Meet Needs of Aging Investors
New research highlights how retirement investments change with age and why personalized investments as a response can drive better retirement outcomes.
T. Rowe Price released its latest whitepaper today, co-authored with experts from the Massachusetts Institute of Technology (MIT) Sloan School of Management and Stanford University, which analyzed the firm’s 401(k) recordkeeping data. It found that a majority of investors prefer a 60% to 80% equity allocation, 10% would rather avoid equities altogether, 5% prefer an all-equity allocation, and the rest fall in between.
Those over the ages of 50 reported having diverse preferences to equity exposure while younger investors between the ages of 20 to 34 preferred a higher equity exposure of over 80%.
Further, 50% of investors ages 50 and older increased their equity share in T. Rowe Price’s data, compared with 34% of investors ages 20 to 34. The research suggests that as investors age, they may feel as if their investments are slowing down and therefore prefer to take on a more aggressive allocation. Others also may develop a preference for risk as they become comfortable with investing, notes the research.
Older investors also took a more active role with their investments compared to younger investors, the research showed. Between 2019 to 2024, just 26% of older investors chose to not alter their equity allocation, compared to 46% of younger investors.
Experts argued how implementing personalization tactics, like moving older participants to managed account solutions instead of traditional target-date fund (TDF) models, could benefit their investment strategies.
“By deepening our understanding of the wide-ranging needs of retirement savers, including how they engage with their investments, we can better understand how to support these needs in each phase of their retirement journey,” said Sudipto Banerjee, Ph.D., a global retirement strategist at T. Rowe Price and co-author of the paper. “With older participants, we see that preferred asset allocation and financial circumstances are more diverse, making them strong candidates for personalized retirement solutions.”
Additional details on the findings can be found here.
SEE ALSO:
Personalized Target Date Accounts Provide Ability to Manage Risk Preferences
Participants Establish Need for Personalized Target-Date Solutions
Managed Accounts Get More Personal in PGIM RetireWell/iJoin Deal
Amanda Umpierrez is the Managing Editor of 401(k) Specialist magazine. She is a financial services reporter with nearly a decade of experience and a passion for telling stories and reporting news. She is originally from Queens, New York, but now resides in Denver, Colorado.
