NEW YORK—Putnam Investments unveiled a new website for its 401(k) plans Monday that keys investors into a monthly retirement income figure, rather than their existing balance or a retirement savings target.
Putnam hopes that by pointing investors toward actionable steps they can take by saving more, retiring later and changing their portfolio mix—instantly visible on a sliding scale that shows the effects on their monthly retirement income—it will break down retirement savings into incremental steps that will both motivate investors and inspire confidence.
“Every time a participant logs into the site, they will see their account balance as retirement income. Their monthly paycheck will always be front and center,” said Ed Murphy, Putnam managing director, head of defined contribution.
“This is a completely new approach to lifetime income planning that we hope will drive a revolution and serve as a new lens through which to view workplace saving,” said Putnam President and Chief Executive Officer Robert L. Reynolds. “The Holy Grail of retirement income solutions will be found in a lifelong glidepath” with absolute-return strategies at its core, and integrating guaranteed, lifetime income analysis, Reynolds said.
“In 2003, the Employee Benefit Research Institute warned of a substantial need among all Americans to raise retirement savings,” Reynolds said. “Unless this happens, EBRI warned, by the 2020s Americans will face a shortfall of hundreds of billions of dollars to meet the essential needs of housing, food and clothing. That is a very ugly scenario that is not very far off, which is why we are making 2010 the year we are going to work to strengthen all retirement savings, both public and private, and why we are bringing this revolutionary new view to the market,” Reynolds said.
The Putnam Lifetime Income Analysis Tool will initially be available to the 401(k) plans Putnam administers, with a roll out to financial advisers in three months, said Jeffrey Carney, senior managing director, head of global marketing, products and retirement at Putnam.
Besides the absolute-return funds that Putnam now includes in its family of Retirement Ready target-date funds, Reynolds said, the company is developing annuities for retirees, in partnership with sister company Great-West Life & Annuity Insurance, as well as portfolios of absolute- and real-return funds to replicate guaranteed income streams. Putnam will announce these new funds in the second or third quarter.
Charles A. Ruffel, founder and director of Asset International/Plan Sponsor, said the “first generation of target-date funds, based on proprietary funds and traditional asset allocation [coupled with] plan sponsors who shrink from distribution discussions” is fast coming to a close.