Financial services firms are urging Congress to adopt retirement savings reforms in the next few years and are readying products that could profit from them.

Several executives are recommending that lawmakers make changes that would ensure income from savings lasts through retirement.

Robert L. Reynolds, president and chief executive officer of Putnam Investments, said defined contribution plans, specifically 401(k)s, need to be improved so that their income stream does not run out too early. People should be able to put a portion of their 401(k) assets in annuities to ensure lifetime income, he said.

"The industry has done a good job of helping people accumulate money," Reynolds said. "Now we need to do a better job of helping people manage their 401(k) plans when they reach retirement."

Robert Clark, a professor of economics and management at North Carolina State's college of management, said Washington needs to add automatic annuitization to 401(k) plans in lieu of lump-sum payments. However, "we have to be careful about creating a one-size-fits-all solution," he said.

In addition to annuities, Aimee DeCamillo, head of personal retirement solutions at Bank of America Merrill Lynch Retirement Services, said other products could help provide a steady income stream in retirement, including laddered bonds.

Putnam has projected that annuity assets will reach $5.5 trillion by 2020. There were $1.7 trillion as of Sept. 30, according to the Insured Retirement Institute.

Beyond traditional annuities, Reynolds said there is a need for a federally insured product for investors to place 401(k) assets to "ensure that they have assets that will last their lifetime."

"I think this could be in an annuity or an annuity-like structure, but nothing is certain," he said. "This is where the work has to be done."

Changes in retirement savings plans over the past three years have proven beneficial, Reynolds said.

The Pension Protection Act of 2006 required employers to enroll all employees in 401(k) plans, though employees may opt out. That drew more assets into the system, as did the growth of target-date funds.

But more attention needs to be paid to what happens once workers retire, industry officials and other say.

A study in June by Bank of America Merrill Lynch found that 45% of retirees and pre-retirees between 55 and 75 years old had not calculated how long their assets will last.

"Most people have unrealistic expectations," said Katherine Roy, a strategy and innovation executive for Bank of America Merrill Lynch Retirement Services. "It is somewhat of a train wreck. People need to recalibrate and understand what they will face in retirement."

Other research has netted similar results. According to research by the Employee Benefits Research Institute, over 70% of people entering retirement haven't done a budget or a calculation about how they will live in retirement.

Dallas Salisbury, CEO of the Employee Benefits Research Institute, said he expects little retirement reform from Washington before 2012 or 2013, "so that puts the onus on the individual" in the meantime.

Companies have already started offering products that do not require new laws. SunTrust Banks Inc. announced Thursday it has added an account insured by the Federal Depost Insurance Corp. as an investment option for companies who choose SunTrust as their institutional 401(k) provider. It is an interest-earning account that offers current income while preserving principal.

In July, Putnam Investments, which had $13.6 billion of defined contribution assets on Sept. 30, launched the RetirementReady Funds, a suite of target-date funds that integrate target absolute return strategies with traditional relative return mutual funds.

The funds are designed to lower volatility during accumulation and pursue a higher level of income for investors in retirement. Reynolds said these funds have "half to a third" of the volatility of typical target-date funds. He said he expects these funds to add assets as retirement plans are augmented.

Analysts said companies like Putnam are looking to create a retirement system that enables them to retain customers — and their assets — after retirement. Burton Greenwald of BJ Greenwald Associates said that a "staggering" percentage of retirees receive their 401(k) assets in "one lump sum" when they retire. "This is bad news for the investment companies and worse news for investors," he said.

Historically, annuities have not been used the right way for retirement, said Tim Clift, the chief investment officer of FundQuest Inc., a Boston unit of BNP Paribas. He said the products need to become less expensive for plan sponsors to begin considering them as part of a retirement plan. FundQuest plans to roll out a low-cost, fee-based "annuity-type" product, said David Robinson, its managing director of national accounts.

Reynolds is optimistic policymakers will start tackling retirement savings issues sooner rather than later.

"2010 is going to be the year we debate these issues on a national scale," Reynolds said. "Once the healthcare debate is behind us, retirement income security will be the issue for 2010. Annuities need to become more transparent, less complicated and less costly to become part of the long-term solution."

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