Survey Shows Americans Unsure about Retirement Income Needs

A recent survey of Americans showed that a majority of respondents (52 percent) said they need a clearer picture of the income they will need to maintain the lifestyle they expect in retirement. Yet an even greater number, 54 percent, said they did not currently have a plan that identifies those needs, the income that their retirement savings can be expected to produce or how to generate the additional income needed to close any gaps.

The survey results were announced today at a Retirement Income summit in New York, hosted by Putnam Investments, and attended by financial advisors, retirement plan sponsors and consultants.

The initial findings in the poll of 1,496 Americans, conducted for Putnam Investments, underscore the growing recognition that many Americans fear they will not have the money necessary to generate the income they will need in retirement and are unsure what steps to take to close that gap. However, contrary to public perception, respondents still had confidence in the markets. The majority of those polled (75 percent) said they did not believe that their investment portfolio had been permanently damaged by the market collapse in 2008, and 66 percent of respondents said they continue to invest in equities.

“Americans who are still in the workforce clearly have been shaken by the economic turmoil of the past several years, and they are understandably concerned about where that leaves them as they approach retirement. Understandably, they are seeking help and solutions to secure the income they will need in retirement,” said Putnam President and Chief Executive Officer Robert L. Reynolds at the firm’s event. “However, they haven’t lost faith in the markets or in the resilience of the American economy.”

The Putnam-hosted summit included remarks by Reynolds; Jeffrey R. Carney, Putnam Investments Head of Global Marketing, Products, and Retirement; and Edmund F. Murphy, III, Managing Director, Head of Defined Contribution, Putnam Investments. It also included a panel chaired by Carney which featured practitioners and academics including Shlomo Benartzi, Professor and Co-Chair of the Behavioral Decision Making Group at UCLA’s Anderson School of Management; Charles A. Ruffel, Founder and Director of Asset International/ PLANSPONSOR; Dallas L. Salisbury, President and CEO of the Employee Benefits Research Institute; and Jeffrey L. Knight, Managing Director, Head of Global Asset Allocation, Putnam Investments.

At today’s event, Putnam announced that it is launching a revolutionary new framework that will change the lens through which investors view their current retirement savings activities, placing much greater focus on future income needs. Putnam’s Lifetime Income SM Analysis Tool is a new approach that will help 401(k) plan participants project how much income their current retirement savings may generate in retirement compared to what they will need, and then offer actionable recommendations.

Americans are highly concerned about how they will fare in retirement

Fewer than one-quarter of respondents (23 percent) classified themselves as “highly knowledgeable” when it comes to determining how their savings will translate into income in retirement; similar numbers of those who participate in defined contribution plans (24 percent) consider themselves to be highly knowledgeable.

A significant need for information

More than half of those polled (52 percent) said they needed a clearer picture of how much income they will need in retirement, and those enrolled in defined contribution plans (61 percent) echoed those sentiments. Forty-four percent said they were unsure about what type of investments are best to generate income in retirement, and 47 percent of those in defined contribution plans said they were unsure.

“The natural fears and concerns that permeate the thinking of most investors saving for retirement are further pronounced given the extreme market chaos witnessed in 2008. Any time you go through a period of great economic stress, as we’ve been through, all assumptions and conventional wisdom are thrown into doubt,” said Carney. “This creates a tremendous need to fill that vacuum with solid financial guidance that will minimize the doubt and confusion. While investors will freely admit that they have a long way to go to ensure secure retirements, their awareness can spur them to more closely examine their income needs and take steps to close any gaps.”

Putnam Investments and Retirement

In May 2009, Reynolds called on the financial services industry, employers and government to join together to meet the nation’s emergent retirement savings challenge – a shortfall in the income Americans will need in retirement. Through what he termed “Workplace Savings 3.0,” Reynolds proposed refocusing retirement savings from accumulating assets to generating income in retirement, and, additionally, strengthening 401(k)s and other defined contribution workplace plans to more reliably deliver lifelong income to workers.

Putnam recently launched a series of retirement initiatives, including the Roth IRA Resource Center with a full range of information about individual retirement account (IRA) conversions, how to evaluate whether they make sense and how to perform them. The Roth IRA Resource Center is aimed at financial advisors, who are dealing with a flood of demand from their clients for advice on conversions since a tax law change took effect on January 1, 2010, eliminating income caps that restricted higher-income investors from converting traditional IRA assets to Roth IRAs.

Putnam also has expanded the services it offers to 401(k) retirement plans and developed products to meet the needs of those planning for or already in retirement. The firm has created a platform that provides flexible and scalable services and solutions for advisors, consultants, and their plan sponsor clients in every segment of the retirement market.

Putnam RetirementReady® Funds, the firm's suite of 10 target-date/lifecycle retirement funds, recently added target Absolute Return Funds* to its mix of underlying investments. RetirementReady Funds became the only suite of lifecycle funds to integrate absolute return strategies, which seek positive returns over time with less volatility than more traditional mutual funds. Employed in retirement portfolios, Putnam Absolute Return Funds are intended to pursue positive returns in up and down markets, to protect against the harmful effects of adverse investment returns and to reduce volatility, particularly for investors in or near retirement.

Putnam Retirement Income Survey

The survey findings are based on a representative nationwide sample of 1,496 U.S. adults, age 22-plus, polled online from January 12 – 17, 2010, by Braun Research. The margin of error was +/-2.5 percent.

About Putnam Investments

Founded in 1937, Putnam Investments is a leading global money management firm with over 70 years of investment experience. As of December 31, 2009, Putnam had $115 billion in assets under management. Putnam has offices in Boston, London, Frankfurt, Amsterdam, Tokyo, Singapore, and Sydney. For more information, go to putnam.com.

Putnam mutual funds are distributed by Putnam Retail Management.

* Putnam's target Absolute Return Funds are not intended to outperform stocks and bonds during strong market rallies.