T. Rowe Price Associates Inc. is unveiling this week a computer program designed to help investors run calculations for determining when a variable-rate annuity makes more investment sense than a mutual fund.
The Baltimore-based mutual fund company says it is the first time such software will be distributed. "There is nothing like it that exists," said Steven E. Norwitz, a spokesman for the firm.
For good reason. To distribute the program, T. Rowe had to receive permission from the Securities and Exchange Commission. The SEC has historically taken the position that it is inherently misleading to release information that projects hypothetical return rates for mutual funds and variable annuities.
But, recently, the SEC changed its interpretation of the law because the use of hypothetical rates of return may help consumers better understand the features of variable annuities, according to the T. Rowe Price spokesman.
Mr. Norwitz said many investors aren't aware that variable-rate annuities often can be better investments than mutual funds, which consumers have so readily embraced. In response, the company spent 10 months creating its program, called the "Analyzer," to enable a customer to compare the benefits of investing in the T. Rowe Price No-Load Variable Annuity instead of in a mutual fund.
"They will realize the annuity can be the better option," Mr. Norwitz said.
Indeed, the company is hoping the software will help it boost interest in its annuity product, which it introduced this month with Security Benefit Life Insurance Co., Mr. Norwitz said.
The company will start giving away copies of the Analyzer this week. About 35,000 copies have been produced. Officials declined to reveal how much was invested in the project.
Generally, investors like annuities because they provide the ability to earn on an unlimited tax-deferred basis. But what frightens some away are the high fees associated with them.
The Analyzer works this way: An investor creates a personal profile by punching in information that includes his or her age, amount invested, expected life expectancy and the year he or she wants to begin taking distributions. The software then calculates the after-tax income during the distribution phase. The program allows the investor to play "what if" games by projecting the amounts that would be distributed at different ages.
At the same time, an investor can compare those results with the results of similar mutual fund investments.