PUTNAM INVESTMENTS RECEIVES AWARD FOR EXCELLENCE IN RETIREMENT PLAN COMMUNICATIONS
Honored for Lifetime IncomeSM Analysis Tool Communications Campaign
BOSTON, October 5, 2011 — At the Retirement Income Industry Association (RIIA) Fall Conference and Awards Gala held earlier this week, RIIA and PLANSPONSOR announced that Putnam Investments was honored with its prestigious Defined-Contributions Communications Award for its Putnam Lifetime Income Analysis Tool, which has driven significant behavioral change in participants.
The proprietary Putnam Lifetime Income Analysis Tool helps workers model how much monthly income their savings might generate in retirement and determine their current retirement preparedness. Early use of the tool by participants in Putnam-managed 401(k) plans demonstrated its effectiveness, with up to 34 percent of 401(k) participants who interacted with the tool, making changes to the amount of income they deferred to retirement savings; 80 percent of the changes were deferral increases; and the average savings rate increase was approximately 23 percent, from 7 percent of income to 8.6 percent.*
“On behalf of Putnam Investments, I’m honored that the RIIA Awards Committee has recognized our education initiatives in support of the Putnam Lifetime Income Analysis Tool with its Defined-Contributions Communications Award,” said Robert L. Reynolds, president and chief executive officer, Putnam Investments. “This award acknowledges our commitment to educating plan participants about the impact of their savings decisions and providing guidance in making the right choices to prepare for retirement.”
Sponsored by the RIIA, PLANSPONSOR and PLANADVISER, the Excellence in Communications Awards are determined by a committee consisting of leading industry editors and publishers. The Awards recognize the best in communications materials, advertising and marketing initiatives intended to help educate and inform plan sponsors and participants and advisors working with retirement plans. The Defined-Contributions Communications Award was presented by Alison Cooke Mintzer, Executive Editor of PLANADVISER.
In addition to the RIIA awards, Putnam has received other honors recently for its communications initiatives and programs. The Mutual Fund Education Alliance named Putnam the recipient of three STAR Awards for 2010 for outstanding mutual fund investor communications, education and support.
Putnam Investments and Retirement
In addition to such initiatives as the Putnam Lifetime Income Score 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.
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 regardless of market conditions. 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
* Research is based on initial data gathered from the activity of 10,000 participants in Putnam defined contribution retirement plans, including nearly 3,000 participants that interacted with the Putnam Lifetime Income Analysis Tool at the end of December 2010.
**The Annual Mutual Fund Industry Awards, presented by Fund Directions and Fund Action, recognize the funds, fund leaders, marketers, trustees and independent counsel who stood out for their successes, achievements and contributions in 2010. Winners are chosen based on a number of factors including innovation, market impact, uniqueness of approach and how well they met other criteria established by the editors for their award category. Putnam was one of four finalists for this retirement service award.
IMPORTANT: The projections, or other information generated by the Lifetime Income Analysis Tool regarding the likelihood of various investment outcomes, are hypothetical in nature. They do not reflect actual investment results and are not guarantees of future results. The results may vary with each use and over time. The analyses present the likelihood of various investment outcomes if certain investment strategies or styles are undertaken, thereby serving as an additional resource to investors in the evaluation of the potential risks and returns of investment choices.
Each simulation takes into account the participant’s current plan balance and investment mix, as well as his or her age, income, retirement date, contribution rate, likely future savings, and estimated Social Security benefit. The tool runs over 50 billion market simulations to provide an estimate of a monthly income likely to be generated at retirement. The Lifetime Income Analysis Tool is an interactive investment tool designed for Putnam 401(k) participants to illustrate the estimated impact of a participant’s plan balances and projected savings on income in retirement. The tool does not take into account post-tax contributions to savings. It also cannot account for dramatic changes in a participant’s personal situation, including unexpected expenses and other financial situations that may negatively affect one’s estimated monthly income in retirement.
The Putnam Lifetime Income ScoreSM represents an estimate of the percentage of current income that an individual might need to replace from savings in order to fund retirement expenses. For example, consider an individual, 45 years old, with an income of $100,000 per year. A Lifetime Income Score of 64% indicates that the individual is on track to be able to generate $64,000 in retirement income (in today’s dollars), i.e., 64% of current income. This income estimate is based the individual’s amount of current savings as well as future contributions to savings (as provided by participants in the survey) and includes investments in 401(k) plans, IRAs, taxable accounts, variable annuities, cash value of life insurance, and income from defined benefit pension plans. It also includes future wage growth from present age (e.g., 45) to the retirement age of 65 (1% greater than the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W)) as well an estimate for future Social Security benefits.
The Lifetime Income Score estimate is derived from the present value discounting of the future cash flows associated with an individual’s retirement savings and expenses. It incorporates the uncertainty around investment returns (consistent with historical return volatility) as well as the mortality uncertainty that creates a retirement horizon of indeterminate length. Specifically, the Lifetime Income Score procedure begins with the selection of a present value discount rate based on the individual’s current retirement asset allocation (stocks, bonds, and cash). A rate is determined from historical returns such that 90% of the empirical observations of the returns associated with the asset allocation are greater than the selected discount rate. This rate is then used for all discounting of the survival probability-weighted cash flows to derive a present value of a retirement plan. Alternative spending levels in retirement are examined in conjunction with this discounting process until the present value of cash flows is exactly zero. The spending level that generates a zero retirement plan present value is the income estimate selected as the basis for the Lifetime Income Score. In other words, it is an income level that is consistent with a 90% confidence in funding retirement. It is viewed as a “sustainable” spending level and one that is an appropriate benchmark for retirement planning.
The survey is not a prediction, and results may be higher or lower based on actual market returns.
Consider these risks before investing: Asset allocation decisions may not always be correct and may adversely affect fund performance. The use of leverage through derivatives may magnify this risk. Leverage and derivatives carry other risks that may result in losses, including the effects of unexpected market shifts and/or the potential illiquidity of certain derivatives. International investments carry risks of volatile currencies, economies, and governments, and emerging-market securities can be illiquid. Bonds are affected by changes in interest rates, credit conditions, and inflation. As interest rates rise, prices of bonds fall. Long-term bonds are more sensitive to interest-rate risk than short-term bonds, while lower-rated bonds may offer higher yields in return for more risk. Unlike bonds, bond funds have ongoing fees and expenses. Stocks of small and/or midsize companies increase the risk of greater price fluctuations. REITs involve the risks of real estate investing, including declining property values. Commodities involve the risks of changes in market, political, regulatory, and natural conditions. Additional risks are listed in the funds' prospectus.
Money market funds are not insured or guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other governmental agency. Although the fund seeks to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in this fund.
Each RetirementReady Fund has a different target date indicating when the fund’s investors expect to retire and begin withdrawing assets from their account, typically at retirement. The dates range from 2015 to 2055 in five-year intervals, with the exception of the Putnam Lifetime Income Fund Lifestyle 1, which is designed for investors at or near retirement. The funds are generally weighted more heavily toward more aggressive, higher-risk investments when the target date of the fund is far off, and more conservative, lower-risk investments when the target date of the fund is near. This means that both the risk of your investment and your potential return are reduced as the target date of the particular fund approaches, although there can be no assurance that any one fund will have less risk or more reward than any other fund. The principal value of the funds is not guaranteed at any time, including the target date.
Request a prospectus, or a summary prospectus if available, from your financial representative or by calling Putnam at 1-800-225-1581. The prospectus includes investment objectives, risks, fees, expenses, and other information that you should read and consider carefully before investing.
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