In a move designed to better enable retirement plan sponsors to
exercise their fiduciary responsibility in helping employees attain
more successful financial outcomes in retirement, Putnam
Investments today announced that its proprietary Lifetime Income
Score SM will be made available more broadly to the defined
contribution marketplace.
Building off of the ability of Putnam plan participants to view
their highly customized Lifetime Income Score – measuring their
individual retirement income replacement trajectories – Putnam will
now be providing employers with a uniquely dynamic view of how well
their plan is working in the aggregate, as well as specific areas
of focus to lead to greater plan success.
Using its Lifetime Income Score analytics, Putnam will be
offering critical plan-level perspective and useful drill-down
insight to 401(k) plan sponsors, which can enable them to take a
series of actions to help positively influence the retirement
preparedness of their workers. Plan sponsors and their advisors
will have the ability to review participant readiness by
demographic groups to pinpoint those most at risk, develop targeted
and measurable campaigns to educate and engage least prepared
employees, showcase income calculations at the forefront of
participant communications and introduce tools to help participants
calculate income goals and gaps – and measure usage.
“There is a rising expectation in the marketplace that plan
sponsors will take a greater role in helping their participants
adequately prepare for retirement,” said Edmund F. Murphy, III,
Head of Defined Contribution, Putnam Investments. “To do that, they
need to know whether their employees are on track, from a future
income perspective, to enjoy a dignified retirement, and how well
their plans are working in readying their workers for
retirement.”
The Putnam Lifetime Income Score plan-level results will be
available to 401(k) plan sponsor clients of Putnam and their
advisors on an ongoing, real-time basis. All qualified plan
sponsors – and their consultants – regardless of their client
status, are eligible to receive a complimentary overview assessment
if requested.
“The name of the game is empowering plan sponsors to focus on
‘guided outcome’ for their participants,” Murphy noted. “The Putnam
Lifetime Income Score was designed in large part to address concern
among plan sponsors about their workers’ readiness for retirement.
Employers will now have an entirely new level of analytics and
comprehensive reporting to allow them to benchmark and track their
progress, and to ultimately serve as a basis for taking confident
action in strengthening their plans.”
According to a recent study,* 62 percent of sponsors said that
their responsibility includes seeing whether their employees are on
course for a comfortable retirement. However, just 18 percent of
sponsors have conducted a retirement readiness assessment during
the past year. Sponsors feel responsible for ensuring their workers
are on track for a secure retirement, but may lack the tools to
assess that progress.
Focus on Retirement Income
Murphy explained that the Putnam Lifetime Income Score approach
also addresses a significant shortcoming in financial planning by
focusing on monthly income in retirement, rather than on undefined
retirement savings balances that often leave individuals in need of
broader context and application. “Our Lifetime Income Score
re-focuses attention where it belongs: Expected income in
retirement,” he said.
The Putnam Lifetime Income Score takes a holistic view of
behavioral tendencies, demographic and mortality factors, current
household income, savings and future contributions from a plan
participant’s age today through age 65. The Putnam-developed
methodology translates current assets, asset allocation mix, future
saving deferrals, company match and Social Security, into estimated
monthly retirement income, reflected in an easy-to-understand
Lifetime Income Score that helps plan participants know where they
stand on retirement readiness.
“The new offering to plan sponsors will allow Putnam Lifetime
Income Score figures to be rolled up in a meaningful way to allow
for targeted guidance and communication to bolster preparedness in
areas of need within a participant base,” Murphy indicated.
America’s Lifetime Income Score
In June 2011, Putnam used the Lifetime Income Score methodology
to analyze information provided in a survey of nearly 3,300 working
Americans** to determine their current retirement preparedness. The
study identified three key variables that drive successful
retirement preparation: disciplined, long-term savings and
investing (regardless of income level), access to a workplace
savings plan and seeking the assistance of a financial advisor.
The research, believed to be one of the most comprehensive such
studies ever conducted, found that American households are on track
to replace an average of 64 percent of their current income in
retirement. Many financial professionals recommend that workers
seek to replace 75 percent of their current income once they
retire.
“Clearly there remains a lot of work to be done to help get
individuals on a more solid track to replace their current income
in retirement,” said Murphy. “We believe that by providing
action-oriented tools, resources and information to the retirement
savings community, significant inroads can be made to close the
existing gap and deliver much stronger outcomes for working
Americans.”
Putnam Investments and Retirement
Since Robert L. Reynolds, a 30–year retirement savings industry
veteran, became Putnam’s President and CEO in 2008, the company has
deepened its commitment to the retirement market and launched a
series of innovations and initiatives to meet emerging customer
needs. In recognition of its leadership in retirement savings,
Putnam was named the inaugural recipient of the “Retirement Leader
of the Year” award at the 2011 annual Mutual Fund Industry
Awards.
In addition to such initiatives as the Putnam Lifetime Income
Score SM methodology, Putnam will also be officially launching a
suite of income–oriented mutual funds that aim to help advisors
work with retirees in developing strategies for monthly income
flows, at varying levels of risk tolerance, to flexibly address
their changing lifestyle financial needs throughout retirement.
The Putnam RetirementReady® Funds, the firm’s suite of 10
target–date/lifecycle retirement funds, were the first suite of
lifecycle funds to integrate Putnam Absolute Return Funds, which
seek positive returns above inflation over three years with reduced
volatility than has been associated with traditional asset classes
that have earned similar rates of return. Employed in retirement
portfolios, Putnam Absolute Return Funds*** are intended to pursue
positive returns in up and down markets, to help protect against
the harmful effects of adverse investment returns and to seek to
reduce volatility.
About Putnam Investments
Founded in 1937, Putnam Investments is a leading global money
management firm with over 70 years of investment experience. At the
end of August 2011, Putnam had $122 billion in assets under
management, including mutual fund assets of $62 billion and
institutional assets of $60 billion. Putnam has offices in Boston,
London, Frankfurt, Amsterdam, Tokyo, Singapore and Sydney. For more
information, visit putnam.com.
* Source: Deloitte Annual 401(k) Survey Retirement Readiness,
2010.
** The Putnam Lifetime Income Survey, with research methodology
provided by the Putnam Institute, was conducted online by
Brightwork Partners and completed in the first quarter of 2011. The
survey of 3,290 working adults age 18 to 65 was weighted to U.S.
Census parameters for all working adults.
*** Putnam’s Absolute Return Funds are not intended to
outperform stocks and bonds during strong market rallies.
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