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Monday, October 24, 2011

Putnam is Absolutely Ready with Retirement Income Funds

Reported by Sean Hanna, Editor in Chief

Bob Reynolds is pushing Putnam Investments [see profile] into retirement income with a new suite of lifestyle funds. The funds are targeted at defined contribution plan sponsors and come with a retirement income analysis tool. Retirement income solutions are a product making inroads in the 401(k) space.

Bob Reynolds
Putnam Investments
Putnam is keeping its new line-up of retirement income asset allocation fairly simple. There are just three funds labelled "1", "2" and "3" that respectively follow "conservative", "moderate" and "aggressive" strategies. That mimics the design used in the 401(k) market for more than a decade. The "1" fund is a rebranding of the Putnam RetirementReady Maturity Fund.

What makes the Putnam funds different is the funds' reliance on the three Putnam Absolute Return funds. The retirement income analysis tool was launched in 2009 and is meant for workers in the plans to calculate their savings needs. Rather than project plan participants' future balances, it shows monthly retirement income against their goals.

The Boston mutual fund firm also has an edge over other fund firms in that it does not have to rely solely on access to 401(k) platforms to distribute the funds. Often, recordkeepers with their own lifestyle, target date or asset allocation funds will be reluctant to push similar offerings from a rival.

Putnam has partnered with Great-West Retirement Servivces' FasCore arm (its sister company under the Power Financial umbrella) to bring 401(k) recordkeeping services to corporate plan sponsors.

Press Release


New Suite of Retirement Income Funds, Working in Tandem with Unique Planning Tool, Brings Critically-Needed Focus to Withdrawal Side of Retirement Savings Equation

BOSTON, October 24, 2011 – In an effort to help retirees and their advisors develop and implement strategies that seek to fulfill lifetime income needs in retirement – and potentially address legacy goals – Putnam Investments today announced the official launch of its Putnam Retirement Income Lifestyle Funds, a suite of three income-oriented mutual funds, along with a powerful Retirement Income Analysis Tool (publicly available at www.putnam.com/retirementincome), which may be used in tandem to confront the unique set of complexities presented by the savings withdrawal phase of retirement.

“The biggest hurdles Americans face in securing a quality retirement is first accumulating sufficient assets, and then ensuring that those assets generate sustainable income for life,” said Robert L. Reynolds, president and chief executive officer, Putnam Investments. “Putnam is offering the marketplace a thoughtful and intuitive approach that tries to provide a solid and sufficiently long runway for people to experience a dignified, financially-secure retirement after a lifetime of working.”

Reynolds explained that in launching its new offering, Putnam is seeking to address a critical piece of the nation’s retirement challenge, which has grown in complexity as the number of Americans reaching age 65 grows dramatically bigger by the day, the potential vitality of traditional sources of “guaranteed” income diminishes and the retirement savings industry braces for a massive influx of assets into end-stage “one-size-fits-all” lifecycle funds.

The Putnam product suite, working in coordination with the new planning tool, is designed to help provide financial advisors with the ability to execute a variety of income strategies for their clients’ retirement years, including the ability to generate income while waiting for Social Security benefits to commence, create a sustainable stream of lifetime income based on expected longevity and estimate related assets that can be earmarked for heirs.

The Putnam Retirement Income Analysis Tool will generate customized lifetime income projections, utilizing scenario-planning based on a number of determining factors – income needs, life expectancy, risk tolerance, and other key financial variables. The tool, when used by advisors, will then suggest possible investment solutions, varying in risk/return characteristics, from the new Putnam Retirement Income Lifestyle Funds suite.

The Putnam Retirement Income Lifestyle Funds Suite

The new suite of Putnam funds -- Putnam Retirement Income Fund Lifestyle 1, Putnam Retirement Income Fund Lifestyle 2 and Putnam Retirement Income Fund Lifestyle 3 -- are intended for investors who are already in retirement, who expect to retire soon or who otherwise plan to begin withdrawing their invested funds in the near future. They include a mix of domestic and international equities, convertible and fixed-income securities, as well as the Putnam Absolute Return Funds, which provide volatility management throughout the drawdown phase.

Based on input provided from the Putnam Retirement Income Analysis Tool, advisors will be able to seek possible solutions from the Putnam suite of products being officially launched today, including:

  • * Putnam Retirement Income Fund Lifestyle 1 (PRMAX) takes a conservative approach that seeks income while also carefully considering capital preservation. It is the new name of the Putnam RetirementReady Maturity Fund, which includes a combination of Putnam Absolute Return 100, 300 and 500 Funds, Putnam Asset Allocation: Conservative Portfolio and Putnam Money Market Fund.

  • * Putnam Retirement Income Fund Lifestyle 2 (PRYAX) applies a moderate approach that seeks income consistent with prudent risk. It is a new fund and strategy based on a combination of Putnam Absolute Return 100, 300, 500 and 700 Funds, domestic and international equity securities, convertible securities and fixed-income securities.

  • * Putnam Retirement Income Fund Lifestyle 3 (PISFX) uses an aggressive approach that seeks income with a secondary objective of capital growth. It is the new name of the Putnam Income Strategies Fund, which has been modified to include a combination of the Putnam Absolute Return 700 Fund, domestic and international equity securities, convertibles and fixed income securities.

“The Lifestyle Funds” are expected to have broad applicability for defined contribution, IRA, and other retirement assets, as either stand-alone solutions or in conjunction with other retirement investment vehicles. The suite complements the Putnam RetirementReady® Funds, the firm’s 10-fund series of target-date/lifecycle funds, which seek to help investors in their savings phase.

The funds are managed by a highly experienced team of veteran portfolio managers including Jeffrey L. Knight, CFA, Putnam’s Head of Global Asset Allocation; Robert J. Kea, CFA, a 23-year industry veteran who joined Putnam in 1988; Robert J. Schoen, a 22-year industry veteran who joined Putnam in 1997; and Joshua Kutin, CFA, who joined Putnam in 1998.

The Retirement Income Analysis Tool

The Retirement Income Analysis Tool can provide an estimate of potential monthly income streams in retirement, how those income levels might change with different risk parameters, and an indication of how long the income might last, based on an expected retirement age and retirement time horizon. The tool is unique in that it also generates estimates of the assets that ultimately could be available to investors’ heirs, enabling advisors to conduct planning around legacy goals, as well as lifetime income.

The Retirement Income Analysis Tool has an easy-to-use and easy-to-understand interface that requires investors to input only the most important data and variables, including current assets, the age at which an investor expects to begin drawing down income; income need and retirement time horizon. The planning tool, which runs billions of market simulations of possible outcomes, generates customizable projections of expected monthly income for model portfolios of varying aggressiveness, and will ultimately provide suggestions to advisors on relevant possible solutions to be considered from the new Putnam Retirement Income Lifestyle Fund suite.

Putnam Investments and Retirement

Since Robert L. Reynolds, a 30-year retirement savings industry veteran, became Putnam’s President and CEO in 2008, the company has deepened its commitment to helping America meet the retirement savings challenge and launched a series of innovations and initiatives to meet emerging customer needs. In recognition of its leadership in retirement savings, Putnam was named the inaugural recipient of the “Retirement Leader of the Year” award at the 2011 annual Mutual Fund Industry Awards.

In January 2009, Putnam introduced its proprietary Lifetime Income Analysis Tool, which helps workers model how much monthly income their savings – as they continue through the accumulation process – 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.*

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 with reduced volatility than has been associated with traditional asset classes that have earned similar rates of return. 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

Founded in 1937, Putnam Investments is a leading global money management firm with over 70 years of investment experience. At the end of August 2011, Putnam had $122 billion in assets under management, including mutual fund assets of $62 and institutional assets of $60. Putnam has offices in Boston, London, Frankfurt, Amsterdam, Tokyo, Singapore and Sydney. For more information, visit putnam.com.

* 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.

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