T. Rowe Price is also a rare publicly traded asset manager that has successfully balanced the interests of both its fundholders and the holders of  T. Rowe Price stock. Although the temptation to earn a quick buck by rolling out trendy new funds has been too much for many rivals, T. Rowe has generally fielded a utilitarian lineup. And while manager departures have picked up in recent years--some planned, some unplanned--T. Rowe has historically done a good job of retaining its investment personnel. Nor has the firm been reticent to close funds pre-emptively in an effort to preserve performance: As of late August 2015, 10 of the firms 135 funds were closed to new investors.

Yet, those closures present a few challenges for investors building a well-rounded T. Rowe Price portfolio from scratch today. Some of the firms best actively managed funds land in the small- and mid-cap rows of the Morningstar Style Box, and those are the very funds that are closed to new investors: Standouts like  T. Rowe Price Mid-Cap Growth ,  New Horizons , and  Mid-Cap Value , for example, are all closed, though current shareholders and investors in 401(k) plans may continue to buy them. Meanwhile, a few of the firms top-tier funds, like  T. Rowe Price Equity Income , have recently undergone manager changes, prompting downgrades in their ratings. (Equity Income retains a Morningstar Analyst Rating of Bronze, however.)

This week, Ill feature model T. Rowe Price portfolios for investors who are accumulating assets for retirement in tax-deferred accounts such as IRAs; that means I developed them without regard for ongoing dividend or capital gains distributions. Next week, Ill feature a series of tax-efficient T. Rowe Price portfolios.

Portfolio Basics
As with my Fidelity and Vanguard Retirement-Saver portfolios, Ive created Aggressive, Moderate, and Conservative versions for the T. Rowe Price Retirement-Saver portfolios. I used Morningstars Lifetime Allocation Indexes to help guide their asset-class exposures, and populated the portfolios with  Morningstar Medalist funds.

Investors should use their proximity to retirement to help determine which portfolio is the best fit for them, while also taking into consideration the presence of other income sources theyll be able to rely on during retirement. To use a simple example, a 55-year-old investor with a pension that will provide all of her in-retirement income needs could reasonably employ the Moderate or even Aggressive versions, assuming she has a high risk tolerance to match her high risk capacity. (This article explains the important difference.) At the opposite extreme, a 30-year-old who enters a high-anxiety state during volatile markets might employ the Moderate portfolio, even though his time horizon is long enough to support a higher equity weighting.

Aggressive T. Rowe Price Retirement-Saver Portfolio
Anticipated Time Horizon to Retirement: 40 years

20%:  T. Rowe Price Dividend Growth
15%:  T. Rowe Price Equity Index 500
10%:  T. Rowe Price New America Growth
10%:  T. Rowe Price Small-Cap Value
30%:  T. Rowe Price Overseas Stock
5%:  T. Rowe Price International Discovery
5%:  T. Rowe Price New Income
5%: T. Rowe Price Real Assets

Ive used the Morningstars Lifetime Allocation Aggressive 2055 Index, geared toward an investor with a high risk tolerance and a roughly 40-year time horizon, to guide this portfolios weightings. Because of its long time horizon, the portfolio allocates more than 90% of assets to equities.

Ive anchored the portfolio with two of T. Rowes better active large-cap funds, the Silver-rated Dividend Growth, a large-blend fund, and the Bronze-rated T. Rowe Price New America Growth, a large-growth offering. The former has been run by Tom Huber for the past 15 years, but the latter has a fairly new manager in Dan Martino, who took over two years ago from Joe Milano. New America Growth was recently upgraded to Bronze from Neutral, as senior analyst Laura Lallos has gained confidence in Martinos abilities running a diversified fund. Lallos also notes that Martino is running it as more of a straight-ahead large-growth fund than Milano did; that may make it an easier-to-use portfolio building block.

I also included a slice of an equity index fund as well as a position in T. Rowe Price Small-Cap Value. Small-Cap Value, too, has a fairly new manager in David Wagner, who took over when Preston Athey retired a year ago. Senior analyst Katie Reichart notes that the funds performance has been underwhelming since Wagner took over, but the fund has retained its Bronze rating thanks to its deep analyst resources, sensible strategy, and reasonable costs in an often-pricey category. (Of course, the fund is the largest non-index small-blend fund, so it ought to be cheap.)

For the portfolios sizable international allocation, I used the Bronze-rated T. Rowe Price Overseas Stock to provide exposure to larger-cap stocks from developed markets; senior analyst Bill Rocco likes its moderate strategy, broad diversification, and the experience that manager Ray Mills brings to the table. To help add a little zip to the foreign stake, I included a small position in T. Rowe Price International Discovery, which focuses on small- and mid-cap stocks--primarily growth names--and comprises a meaningful emerging-markets weighting.

In keeping with the Lifetime Allocation Index 2055/Aggressive weighting, I added a small stake in T. Rowes core intermediate-term bond fund, the sturdy T. Rowe Price New Income. Its manager, Dan Shackelford, aims to outperform the Barclays US Aggregate Bond Index on a risk-adjusted basis by taking modest bets relative to that benchmark. In charge since 2002, he has delivered reliable performance over several market cycles, according to senior analyst Cara Esser. The portfolio also includes a slice of real assets exposure--mainly REITs and basic-materials stocks--to supply diversification and inflation protection.

Moderate T. Rowe Price Retirement-Saver Portfolio
Anticipated Time Horizon to Retirement: 20 years

20%: T. Rowe Price Dividend Growth
15%: T. Rowe Price Equity Index 500
10%: T. Rowe Price New America Growth
10%: T. Rowe Price Small-Cap Value
20%: T. Rowe Price Overseas Stock
5%: T. Rowe Price International Discovery
15%: T. Rowe Price New Income
5%: T. Rowe Price Real Assets

Although its geared toward an investor with a shorter time horizon than the Aggressive portfolio--someone who has about 20 years to retirement--this portfolio is also quite stock-heavy, with 80% of assets in stocks. Its only variance with the Aggressive portfolio is that its foreign stake is lower while its bond position is larger. Because bonds are still a small slice of the total pie, a single high-quality core fund does the job; a lot of additional moving parts are unnecessary.

Conservative T. Rowe Price Retirement-Saver Portfolio
Anticipated Time Horizon to Retirement: 5 years

15%: T. Rowe Price Dividend Growth
15%: T. Rowe Price Equity Index 500
5%: T. Rowe Price Small-Cap Value
15%: T. Rowe Price Overseas Stock
30%: T. Rowe Price New Income
7%:  T. Rowe Price Short-Term Bond
8%: T. Rowe Price Inflation-Protected Bond
5%: T. Rowe Price Real Assets

Geared toward an investor with just five years until retirement, this portfolio has a sizable 45% weighting in bonds. If stocks encounter a major downdraft in the years prior to the pre-retirees anticipated retirement date, the bonds should serve to stabilize the portfolio. Because the bond position is larger than is the case in the Aggressive and Moderate portfolios, its also better diversified. Its too early to start hoarding cash in bucket one (as in the bucket system), but I have included a stake in short-term bonds to protect the portfolio in case of interest-rate hiccups. Ive also included a stake in inflation-protected bonds to help protect the purchasing power of the portfolios bond sleeve. T. Rowe only fields a single TIPS fund (Vanguard, by contrast, offers a core TIPS fund as well as a short-term offering), but the T. Rowe funds duration is lower than some core TIPS funds, including  Vanguard Inflation-Protected Securities .

Given that the portfolio will need to last another 30 years or more, its important that it maintains a still-high equity allocation to provide long-term growth. Stocks account for half of the assets in the Conservative portfolio, and Ive retained allocations to Overseas Stock and Small-Cap Value. However, Ive generally aimed to steer the equity portfolio in a lower-volatility direction, slicing its stakes in New American Growth and International Discovery. 

How to Use
As with all of the model portfolios, the key goal here is to depict sound asset-allocation and portfolio-management principles. That means that investors can and should plug in another fund in the same category if one of the funds Ive named here is unavailable or if Ive omitted one of their favorites. (I would have loved to include one of the Primecap-managed offerings, for example.) Alternatively, an all-index portfolio is perfectly appropriate. (My tax-efficient Vanguard Retirement-Saver portfolio--coming next week--will be heavy on index funds.)



In the past two weeks, weve been talking about a retired couple who wants to invest safely while keeping research to a minimum. We reviewed a number of resources and questions to ask, and we talked about risk.

Id like to come back to an important point that I dont want you to miss: People tend to focus on which investment to choose before they understand enough about themselves. Risk-averse retirees, especially those who have little interest in the financial markets, need to assess their personal risk my term before even thinking about which investments they should buy.

An example came from Jordan.

Like Bob and Mary from last weeks column, Jordan explained that he was risk-averse. He wanted to know what types of investments he should be making considering the market.

Keep in mind that the stock market recently experienced six consecutive declines. The SP 500 index fell 0.26 percent last Tuesday (Aug. 18); 0.83 percent last Wednesday (Aug. 19); 2.1 percent on Thursday (Aug. 20); 3.2 percent on Friday (Aug. 21); 3.9 percent on Monday (Aug. 24); and 1.4 percent on Tuesday (Aug. 25), followed by two consecutive increases of 3.9 percent on Wednesday (Aug. 26) and 2.4 percent on Thursday (Aug. 27).

I advised Jordan that before picking investments, he needed to ask himself about his own personal risk.

Personal risk has nothing to do with a risk-assessment questionnaire. It has to do with something much more important, as it leads to an understanding of whether a retiree will run out of money.

So, here is the question: Do you need to access your savings to pay your bills?

Jordan answered yes, as his Social Security retirement benefits were insufficient to cover his needs.

Now, lets stop there for a second.

If Jordan had no need to access savings to live on through retirement, he would have a low-personal-risk profile. Individuals in this situation have sources of income from Social Security (and pensions) in amounts that are sufficient to cover their living expenses. In the best situations, these income streams are inflation-adjusted to cover rising expenses.

Anyone who needs to access savings to pay for living expenses has a high- personal-risk profile. These people should not choose investments of any kind until they address just how much will need to be withdrawn from investments to pay the bills.

In Jordans case, he has $1.5 million in savings, which seems like plenty of money, until the expenses come into the equation Jordan needs to withdraw $150,000 to cover his yearly living expenses above and beyond his Social Security retirement benefit.

Now, Jordans question becomes: I have $1.5 million to invest; I need to withdraw $150,000 each year, after taxes. I need that withdrawal to increase yearly to cover rising costs due to inflation as time goes on, and I would like to leave a legacy for my children. I am a novice investor. I dont want to lose money. How should I invest?

Framing the question this way opens up a different issue altogether as it is meant to do.

The standard risk questionnaire leads to asset-allocation decisions and investment selection. The personal-risk assessment tees up decisions that preserve a lifestyle, determine the demands that will be made of the retirement nest egg and set up a personal portfolio to manage.

With this approach to risk, issues surface that need to be addressed as quickly as possible. In Jordans case, he will need to lower expenses. And he will not be able to avoid some research and learning. Too much is at risk. And its not just the volatile stock market.

This email address is being protected from spambots. You need JavaScript enabled to view it.



Much has been written about the general lack of retirement preparedness among working Americans. Younger workers, the millennial generation, now in their 20s and early 30s, no doubt face considerable headwinds when it comes to securing their retirements.
Few will be able to count on company pensions for guaranteed retirement income. Even if their employer offers such a plan in addition to its 401(k), they are not likely to stick with a single employer long enough to earn much in the way of pension income. Moreover, without some changes to Social Security, they are right to question how much retirement support they can count on from Uncle Sam.
Coming of age during the Great Recession also appears to have left millennials more focused on short-term financial issues than on retirement planning. In its 2014 study on generational financial issues, Financial Finesse found only 29 percent of millennials have calculated how much retirement savings they will need. Their lack of retirement focus is understandable given that millennials have been forced to wrestle with higher levels of unemployment and student loan debt than previous generations. The immediate needs of securing a decent job and making student loan payments have pushed the distant prospect of retirement to the back burner.#xa0;
Still, other research suggests millennials are doing a better job than their parents at saving and reducing debt. According to a recent eBay survey, nearly half of millennials report saving 15 percent or more of their income, and about 7 percent are saving 50 percent or more of their paychecks, putting them ahead of both Generation X and baby boomers on the savings front. In 2013, the Pew Research Center reported younger households (under age 35) reduced their total debt by 29 percent between 2007 and 2010 in the wake of the Great Recession, while older households cut their debt burdens by only 8 percent.
These survey findings suggest millennials financial decisions have been shaped to a large degree by seeing the impact the recession had on their parents wealth. Increasing savings and reducing debt are important components of an overall financial plan, and these habits bode well for millennials when it comes to retirement planning. The downside of having lived through the Great Recession is that millennials may not be making the best choices when it comes to investing their savings. Much of this money is landing in low or no-interest checking and savings accounts where its purchasing power is severely eroded by inflation; even at todays low inflation rates. Having seen two significant stock market declines as they entered adulthood, millennials have shied away from investing in riskier assets which can allow their savings to grow faster than inflation eats it away. According to a recent Bankrate survey, only 26 percent of Americans under age 30 have some of their savings invested in stocks.
Overcoming this risk aversion may be the biggest challenge millennials face as they begin to confront long-term financial goals like retirement. Without the higher returns offered by stocks, much higher savings rates will be needed. Time, however, is on their side. Even small amounts invested consistently in stocks can pay off handsomely over a long period. For example, assuming a relatively conservative return of 7 percent for stocks (less than the 10 percent long-run average for the S amp; P 500 Index), a 25-year-old who makes a $200 monthly investment in stocks would see her savings grow to more than $700,000 by retirement (age 65). If she waits 10 years to start saving at this rate, her nest-egg will be less than half of this amount (about $302,000).
Millennials should continue to be mindful of debt and keep saving, but also be sure to invest some of their savings for growth. Keep an emergency fund of at least six months of expenses in safe, liquid accounts like savings accounts and certificates of deposit. For retirement, be sure to take full advantage of workplace 401(k) plans by contributing enough to receive a full company match. If additional funds are available for savings, consider opening a Roth IRA and funding it with regular contributions. Roth IRAs are excellent vehicles for younger workers in lower tax brackets as the investment earnings in these accounts will compound on a tax-free basis. In addition, Roth contributions can be withdrawn tax-free if needed prior to retirement. #xa0;
David T. Mayes is a Certified Financial Planner professional and IRS Enrolled Agent at Mackensen amp; Company, Inc., a fee-only advisory firm in Hampton. He can be reached at (603) 926-1775, This email address is being protected from spambots. You need JavaScript enabled to view it. or by visiting www.mackensen.com.


Most academic economists spend their careers writing research that has little impact on the outside world. Its safe to say that Harvards Brigitte Madrian has made an impact. Her studies on the remarkable power of default options in defined contribution plans led to policy improvements that will help millions of Americans be better prepared for retirement.

Just as important, Madrians research shook the foundations of traditional neoclassical economics and changed the way academics think about public policy.

This month, Madrian receives the 2015 Achievement in Applied Retirement Research Award, presented by the Retirement Income Industry Association in partnership with Research magazine and sister publication ThinkAdvisor.com. (See sidebar A Distinguished Award.)

Madrian, who received her economics PhD from MIT, is Aetna Professor of Public Policy and Corporate Management at the Kennedy School of Government, Harvard University. She also serves on FINRAs Board of Governors, among other affiliations.

Madrians paper titled The Power of Suggestion: Inertia in 401(k) Participation and Savings Behavior, coauthored with Dennis Shea, was published in the Quarterly Journal of Economics in 2001. It provided empirical evidence that automatic enrollment had a remarkable impact on employee participation in 401(k)s.

This ran counter to neoclassical economic theorys expectation that defaults would not affect participation. A rational employee would simply save the right amount of money each month based on how much she valued living well in retirement. In reality, people arent quite so rational.

In a series of subsequent papers using actual participant data, Madrian and her co-authors established unequivocally that individuals will accept the employers default savings rate and the default investment. Both findings contributed to the remarkable success of the 2006 Pension Protection Act (PPA), which provided subtle carrots for employers to default participants into plans and investments that were theoretically appropriate for their life-cycle stage.

Evidence from record-keepers shows that these changes which neoclassical economics predicts would have no impact on behavior have transformed how workers invest and how much they save. In particular, average workers in younger cohorts who began working after the PPA are saving at much higher rates than older cohorts who werent able to benefit from the power of defaults. The retirement security of these workers can be traced to the applied research of a group of young economists who have pushed the science of economics to accept people as humans, and to improve policy by accepting and adapting to their humanity.

David Laibson, Harvard colleague and a member of this group of behavioral economists and Madrians frequent co-author, describes her as fearless she tells people what she thinks, whether or not the listener likes the message. This is one of the reasons her work is so important. She gets to the truth of the matter, even if the result is not politically correct or popular.

Brigittes work is the gold standard for research that is both intellectually rigorous and impactful in practice, according to University of Illinois professor Jeffrey Brown, who notes that she is a very funny and fun person. On top of those great qualities, Brigitte is also an admirable example of selfless service to the economics profession. She can always be counted on to lend a hand at any task, no matter how big or small.

I can confirm she is also a lot of fun to interview. I asked Madrian to discuss how she developed an interest in applied retirement research, and her opinions on changes in policy since her findings were first published. The following are excerpts of our Qamp;A session.



As much as we hate to admit it, there comes a point where it is time to hang it up.

In some respects, you can see it coming. Maybe the old coach has lost a little off the heater or can't keep up with the times. There is a news conference, some parting gifts and a few good-luck handshakes to go along with the retirement announcement.

Some hang around too long. The ship has sailed, but they aren't smart enough to realize it. Their record or reputation is tarnished when they realize even though there are openings, nobody wants to bring them in.

Others just want to go out on their own terms. John Kruk did it. And, this week, so did the most popular barber Wilkes-Barre has ever seen.

Mousey, the guy on the corner -- where there was something wrong if you parked your car when the light was red and were still in the chair when it turned red again -- hung up the clippers this week.

There was no formal announcement, just two signs on the window that read "Closed" and "Retired." With that, he walked away.

Though Mousey fashioned himself as a hairstylist, believe me, there was no style. That was it. Plain and simple.

You wanted the latest rumors, Mousey had them. You wanted a few laughs, Mousey had them. You wanted to pass a few messages along to some of his customers, he was more than happy to do that, and stir the pot too.

But more importantly, Mousey was your friend.

He cut your hair, hung your accolades on his wall, even went to see you play. He cared about your family and was a fixture at Wilkes-Barre Memorial Stadium during football season and GAR during basketball season.

And if there was a big game some place else, he found a way to get there.

All that said, his retirement will have an impact on the economy in the Wyoming Valley. Hat sales are sure to decrease now that he is no longer cutting hair.

In all seriousness, the old-time barbers are like football coaches. Mousey is one of them. Bernie, the best barber on Main Street in Luzerne, who also retired this month, is another. They have seen it all, heard it all, and nothing beats hearing a story from either of them.

Though Bernie did go through fewer chairs than Mousey, which speaks to Mousey's clientele, here's to the both of them.

Enjoy your retirement. You have earned it.

And now on to football

So, at last, the regular season kicks off this weekend.

There is probably no more interesting race in the Wyoming Valley Conference than the Class AAA race.

Crestwood is the defending district champ. Berwick is still Berwick. Coughlin and Dallas can't be counted out either. As luck would have it, Crestwood visits Berwick on Friday night in the season opener.

Crestwood has won the last two meetings between the two teams. Surely Berwick will remember the celebrations after both of them. That should make for a fun night at Crispin Field.

In Class AA, looks like it will be a race between Lake-Lehman and GAR. The rest of the WVC is going to have to show up and prove they should be in consideration. GAR gets a huge test right out of the gate against Old Forge at home on Saturday.

Class AAAA looks like it will be Valley West's to lose, but don't sleep on Williamsport. If Charles Crews can get this group to come together early, it should make things interesting.

Then there's Hazleton Area. It is the Cougars' second year under coach Mike Brennan. Don't think for a minute that he will be satisfied with last year's results and he is just settling on hoping for steady improvement this year.

If the Cougars can get off to a good start, it should make for an interesting year in AAAA, something the conference can use.

Saturday night special

Once again this season, we get some single Saturday night games at Wilkes-Barre Memorial Stadium -- and games that don't just involve Holy Redeemer.

Nothing beats a Saturday night game, particularly early in the season when the weather is still a little warm and there's the looming threat of late afternoon and early evening thunderstorms.

You know when late afternoon and early evening thunderstorms don't roll through? At 1 pm on a Saturday afternoon. But the next time you hear school districts are hurting for money, go to a school board meeting and ask how much it costs to turn the lights on for a Saturday night game when nobody is scheduled to play in the afternoon.

It is understandable that games at Wilkes-Barre Memorial Stadium need to be shifted around, since four teams play home games there. But there is no reason for the stadium to sit idle during the day just to play at night.

What to watch for

This is a big week for high school football fans of The Citizens' Voice.

On Wednesday, the preseason edition of Gameface will be released. It will be chock full of features, notes, rosters and anything you need to get ready for the start of the season.

On Friday, the Week 1 edition of Gameface will be available, which will preview all this week's games. Friday will also mark the return of the Gameface live chat, which begins at 12:30 pm at citizensvoice.com.

And don't forget the Gameface Extra podcast. It is loaded and ready to go. Download it now at blogs.citizensvoice.com/varsity.