PUTNAM INVESTMENTS SELECTED TO JOIN BANK OF AMERICA MERRILL LYNCH ADVISOR ALLIANCE PROGRAM AS A DEFINED CONTRIBUTION PROVIDER
Merrill Lynch Financial Advisors can Access an Array of Award-Winning Putnam 401(k) Services and Tools
BOSTON, February 15, 2012 — Putnam Investments announced that it has entered into a strategic alliance with Bank of America Merrill Lynch. Through this alliance, Putnam's defined contribution plan products and services will be made available through the Merrill Lynch Advisor Alliance program to Merrill Lynch Financial Advisors and their small and middle market clients. The Advisor Alliance program includes a unique combination of Merrill Lynch investment services and recordkeeping and retirement plan administration services from a diverse selection of preferred alliance partners.
Through Putnam’s participation in Advisor Alliance, Merrill Lynch Financial Advisors will have access to its award-winning Lifetime Income Analysis ToolTM participant experience, plan management tools for plan sponsors including the proprietary Lifetime Income ScoreSM, well–regarded communication and education programs, and a multi–manager investment menu. These services can now be offered to advisors’ small and middle market clients, primarily those with $5 million to $50 million in defined contribution plan assets.
“We are pleased that Putnam has been selected for the Advisor Alliance program, and look forward to working with Merrill Lynch and their advisors to deliver competitive and innovative workplace savings solutions to their clients,” said Edmund F. Murphy, III, Head of Defined Contribution for Putnam Investments. “This development is further affirmation that our differentiated offering continues to gain traction in the marketplace.
“Putnam’s progressive, results–driven 401(k) approach — intensely focused on helping participants attain greater levels of preparedness for retirement — combined with the industry savvy, market credibility and distribution potency of Bank of America Merrill Lynch, has all of the potential makings of a highly successful strategic retirement partnership,” Murphy added.
Lifetime Income Analysis Tool: Guiding and Impacting Change
Early use of the Putnam Lifetime Income Analysis 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.*
Lifetime Income Score: Helping Plan Sponsors Help Participants
Using its Lifetime Income Score analytics, Putnam offers 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 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.
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About Putnam Investments
For Putnam Lifetime Income Analysis Tool — IMPORTANT: The projections, or other information generated by the Lifetime Income Analysis Tool regarding to 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 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 on 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.
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.
* Based on Participant website usage data for the period 6/30/10–6/30/11; LIAT users are defined as participants who logged on to the website and moved the deferral rate slider on the Lifetime Income Analysis Tool at least once.
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