Glidepath 2023 Update 07 Dec- PI final Version

Graph showing years to retirement versus Equity & Non-Traditional Exposure percentage. Running from 100% 45 years to retirement to 40% at Retirement age, dropping to 35% 10 years after retirement.

Glidepath Overview

Accumulation Stage

PreservatIon Stage

Inflation protection Stage

Accumulation

The glidepath starts with a high allocation to domestic and foreign equities, as well as commodities and real estate to help provide for potential growth.

Explore the Accumulation Stage

As the plan participant ages, equity exposure decreases.

Shifting Exposure

Explore the Preservation Stage

Ten years prior to the target date, the glidepath steepens as its shift from riskier assets to more conservative ones.

Ten Years to Retirement

Explore the Preservation Stage

At retirement, the exposure to equities continues to decrease to help provide additional protection against equity market declines.

Retirement

Explore the Income Protection Stage

10 years after the target date, the glidepath stabilizes with a portfolio focused on inflation protection.

Inflation Protection in Retirement

For illustrative purposes only. Not representative of the funds' actual glidepath.

Accumulation Stage

During the Accumulation Stage, the PGIM Target Date Glidepath is designed to give higher equity exposure when the greatest risk is not taking enough risk.

This is a line graph image with $0 to $25,000 in $5,000 increments on the Y axis and 1/00 to 1/16 in increments of 1 on the X axis. At approximately $6,000 and 1/03, 45% drawdown is marked on the graph. At approximately $6,000 and 1/09, 51% drawdown is marked on the graph. The blue line in the graph represents S&P 500 Index.

In spite of their great ability to take risk simply by virtue of their age, young investors (in their 20s) have showed an extreme degree of risk aversion caused by three massive drawdowns over the past 20 years.

Risk: Not Taking Enough Risk

Within long-dated vintages , the PGIM Target Date Funds provide among the highest combined exposure in the industry to equities, real estate and commodities.

Solution: Greater Equity Exposure in Early Years

Source: Morningstar as of 12/31/22. Calculated by PGIM Investments LLC using data from Morningstar. All rights reserved. Used with permission. Indexes and category averages are unmanaged and do not take into account fees and expenses. You cannot invest directly in an index or category average. Stocks are represented by the S&P 500 TR USD. The S&P 500® Index is an unmanaged index that includes 500 leading companies in the leading industries of the U.S. economy, capturing 75% coverage of U.S. equities.

Inflation protection Stage

PreservatIon Stage

Accumulation Stage

Glidepath Overview

** Long-dated vintage refers to a target date fund with an estimated retirement date between 2050 and 2060.

*Source: EBRI, 401(k) Plan Asset Allocation, Account Balances, and Loan Activity Reports, 1999–2014.

Preservation Stage

During the Preservation Stage, the PGIM Target Date Glidepath is designed to lower equity exposure when you have the most to lose and don't have time to recover losses.

As participants near retirement, there is less time to recover from significant losses. Even with identical average returns and annual withdrawal rates, two portfolios could result in very different outcomes over 30 years in retirement due to the timing of market downturns.

Risk: Significant Market Declines

Chart showing Reversed Returns and Early Losses over a 31-year period. Early losses are depleted by year 17.

To mitigate the risk of significant market declines, the PGIM Target Date Funds reduce equity exposure and increase fixed income exposure in the 10 years leading up to and 10 years beyond the target date.

Solution: Reducing Volatility

Source: PGIM Investments. Chart is for illustrative purposes only and does not represent any particular security.

Inflation protection Stage

PreservatIon Stage

Accumulation Stage

Glidepath Overview

Inflation Protection Stage

During the Inflation Protection Stage, the PGIM Target Date Glidepath is designed to focus on assets that help preserve purchasing power for 30+ years in retirement.

Inflation is a valid concern for retirees and can erode savings. If inflation were to be 5% instead of 1%, an investor could lose 20 years’ worth of annual withdrawals.

Risk: Inflation Eroding Savings

During retirement, the PGIM Target Date Funds allocate a large percentage to asset classes that have historically performed well during inflationary periods to help reduce the potential for inflation to erode the participant’s purchasing power.

Solution: Increase Exposure to Inflation

Source: PGIM Investments. As of 12/31/2021. Calculated by Prudential Investments LLC and assumes 5% annual rate of return.

Inflation protection Stage

PreservatIon Stage

Accumulation Stage

Glidepath Overview