A recent survey of 3,300 working Americans conducted by Putnam Investments disclosed that American households are on track to replace only about 64% of their current income in retirement -- significantly less than the 75% of income that most financial professionals recommend. 

To help address that problem, Putnam, a leading money management firm based in Boston, announced Wednesday that it is making available to client plan sponsors and their financial advisors a product called Lifetime Income Score, a tool it says will give employers and their advisors a way to help boost employees’ retirement savings.

By allowing sponsors and their advisors to look not just at retirement plans in aggregate, but at participant retirement preparedness broken down by demographic groups and by estimated monthly retirement income, Putnam Investments says Lifetime Income Score will allow those using the approach to identify participants who are most at risk empower them to develop “targeted and measurable campaigns to educate and engage least prepared employees.”

The same Putnam study found that 62% of plan sponsors say their responsibility includes making sure their employees are on course for a comfortable retirement, while just 18% said they had conducted a retirement readiness assessment during the past year.

Many claimed the reason for no recent assessment is they lack the tools to conduct such a study.

Edmund F. Murphy III, head of defined contribution at Putnam, told Financial Planning, “What we’re trying to do here is a paradigm shift. In evaluating plan performance, everyone has been looking at participation rates, and that doesn’t tell the story. Even looking as average account balances doesn’t do it. What matters is income.”

He said the firm’s research shows that most participants in plans spend no more than 30 seconds looking at their accounts. “They basically check their balance and they leave,” he said. “We want them to stay longer and look at where they are in terms of retirement income.”

Putnam retirement plan participants had already been able to use a tool called Lifetime Income Analysis to measure their own retirement income trajectories, but the new offering allows sponsors and advisors to also look at the plan in aggregate and to drill down by demographic groupings.

Murphy said employers and their advisors will now have in their hands a new level of analytics and comprehensive reporting to allow them to benchmark and track their progress in terms of participant retirement income and to ultimately serve as a basis for taking confident action in strengthening their plans.”

Murphy also said that the company is working to adapt the Lifetime Income Score tool, which works on a computer dashboard, work not just for analysing Putnam retirement products, but also the products of competing firms, “so that advisors who are handling our products but also other products can use it to analyze both.” 

He said they can do some of that now, “but it involves manually providing us with eight or nine data sets.” He adds that efforts are afoot to automate that process.

In addition to announcing the new analytical product, Putnam announced that it is about to launch a suite of income-oriented mutual funds designed to help advisors work with retirees in developing strategies for monthly income flows with varying levels of risk tolerance.






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