529investing

Age-Based Fund: T. Rowe Price Retirement 2045 (TRRKX)

24-Feb-2010:  ** UNEDITED **

I thought choosing an age-based fund to follow was going to the easy part (as compared to the actively managed fund). I thought wrong.

I wanted to use a Fidelity age-based fund as the baseline to compare my performance against.  Fidelity happens to be my state’s 529 broker and a very well respected investment company.  The problem is, their aged-based funds that are available for 529 contributions do not have ticker symbols, therefore, you can not follow it’s performance.  I could download the fund prospectus once a quarter and get the fund performance as it compares to a benchmark (like the S&P 500).  The problem is, I do not know if it is apples-to-apples comparison. Time periods may differ slightly, how they measure the S&P 500 benchmark may differ slightly, etc.

No problem! I can figure a way around this, I am a clever person. I will just choice an age-based fund from another company, just about every company has them now. Come to find out, none of them have ticker symbols. I imagine this give the investment companies more freedom and less rules/regulations to follow then if the fund was traded on the open market. A cost cutting measure, which I can understand. Lower the expense ratio, higher the return for the investor.

So, I returned to the Fidelity age-based fund I would of picked, UNIQUE Portfolio 2027. I decided to try to find a traditional age-based retirement fund (with a ticker symbol) that appears to be most similar to the asset allocation of the UNIQUE 2027 portfolio.  After some searching, I found T. Rowe Price’s age-based retirement fund, T. Rowe Price Retirement 2045 (ticker: TRRKX). I feel this has the similar asset mix to Fidelity’s UNIQUE 2027 fund.

I will have compare the asset mix every five years or so. The Fidelity UNIQUE 2027 will morph into a more conservative portfolio a lot quicker then the T. Rowe Price Retirement 2045 fund. Every 5 years, I will have to change my fake T. Rowe Price holdings to the T. Rowe Price fund the closest matches the asset allocation of the UNIQUE 2027 portfolio at that time.

The T. Rowe Price website has a nice tool that shows the changing allocation over time: http://individual.troweprice.com/public/Retail/Mutual-Funds/Retirement-Funds/RDF-2045?v_linkcomp=link&linkplmt=RN&v_link=findFundModule . You can see below that today, it is 90% Stock / 10% fixed income. The stock are divided 72% domestic and 18% international.  In 2028, the fund will be 82% Stocks / 18% fixed income, which is way too aggressive and not representative of the asset allocation of the Fidelity UNIQUE fund at that time.

T. Rowe Price 2045 Asset Allocation: CY 2010

T. Rowe Price 2045 Asset Allocation: CY 2010

T. Rowe Price 2045 Asset Allocation: CY 2028

T. Rowe Price 2045 Asset Allocation: CY 2028

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