Latest Putnam Investments Lifetime Income Score Report Points to Workplace Savings Availability, Auto-Pilot Features and Higher Savings Rates as Keys to Retirement Success

Putnam Investments today released its fourth annual Lifetime Income Score SM research report, considered to be one of the most comprehensive analyses of Americans’ retirement preparedness. The 2014 report, based on a study of over 4,100 working American households and weighted to match U.S. Census data, found:

• Americans overall are on track to replace only 61% of their current income once they reach retirement, resulting in a Lifetime Income Score of 61.
• Americans who lack a workplace savings vehicle such as a 401(k) defined contribution plan are projected to be able to replace just 42% of their working income once they retire, even with Social Security factored in.
• In contrast, Americans who have access to on-the-job savings plans are on track to replace 75% of their pre-retirement income.
• American households which defer 10% or more of their income to retirement savings are on track to replace 111% of their pre-retirement income, while those which save 15% or more of their income stand to replace 134% of their working income in retirement.
• Americans with a paid financial advisor are projected to be able to replace 82% of their pre-retirement income, while those without an advisor are expected to be able to replace just 56%.

“After four years of Lifetime Income Score research, the difference in retirement readiness between Americans who have access to workplace savings plans and those who don’t remains staggering, underscoring the importance of expanding the availability of these plans,” said Edmund F. Murphy, III, Head of Defined Contribution, Putnam Investments. “It is time for retirement policy in America to look at what is working well and then find ways to spread that success as widely as possible -- across all workplace savings plans.

“The study also finds that being prepared for retirement is not solely a function of ‘having more money.’ We anticipate that nearly 33 million working Americans are on track to replace 100% or more of their current income in retirement, and they come from all income levels, not just the well-to-do,” Murphy explained.

The release of the latest Putnam Lifetime Income Score study comes as Putnam’s retirement business is being integrated into that of Great-West Financial, which also recently announced that it will be acquiring J.P. Morgan Retirement Plan Services as part of an expanded focus on meeting the kinds of retirement needs identified by today’s study. Additional key findings include:

• Workers remain uncertain about their post-retirement income needs: Seven in 10 (67%) do not know how much they will need for healthcare in retirement, 63% lack confidence that they know how they will cover these expenses and just 16% report they have private long-term care insurance. Overall, nearly six in 10 (56%) workers are not confident that they will be financially ready for retirement.
• Americans overall expect Social Security to provide 34% of their income in retirement, yet only 37% are confident they will receive their full Social Security benefits in retirement.
• Automatic plan features have a positive effect on retirement preparedness: Respondents whose workplace savings plan has an auto-deferral rate in the 4% to 6% range are projected to be able to replace 71%. Americans whose workplace savings plans feature auto-escalation of savings rates averaged 98%, while those workers who do not enjoy this feature can expect to replace only 74% of their pre-retirement income.
• Although just 12% of American workers have a retirement financial plan that factors in healthcare costs, the number of workers saving for healthcare expenses has nearly doubled in the past three years, rising to 26% in 2014 from 15% in 2011; among this group, the median LIS is 104% -- compared to 81% for those workers whose plans do not include the cost of healthcare.

“Our research indicates that millions of Americans could face the risk of a serious drop in living standards once they reach retirement,” said Murphy. “But the study also tells us that Americans can act to shape better futures for themselves by lifting their savings rates, reducing debt and securing professional advice for retirement planning. Workplace savings plans, especially those that automatically enroll people and lift their savings, too, over time can help them do this. Employers and workers should ask their plan's sponsors to offer these advanced plan design features plus access to advice, and public policymakers need to encourage these best practices by as many American businesses as possible. This is what works.”

About the Survey

The Putnam Lifetime Income Survey, with research methodology provided by the Putnam Institute, was conducted online by Brightwork Partners and completed in December 2013 – January 2014. The survey of 4,148 working adults age 18 to 65 was weighted to U.S. Census parameters for all working adults.

About Brightwork Partners LLC

Brightwork Partners is a specialty research and consulting firm focusing primarily on the retirement services market. Founded in 1999, the firm routinely conducts custom and multi-client research among advisors, consultants, plan sponsors, third party administrators and participants on behalf of major providers in the industry.

About Putnam Investments

Founded in 1937, Putnam Investments is a leading global money management firm with over 75 years of investment experience. In February 2014, for the third time in five years, the firm was named one of the top two mutual fund families by Lipper/Barron’s based on the firm’s performance across asset classes in the previous year. In 2014, Putnam also was ranked #2 out of 55 fund families for its performance over the past five years. At the end of March 2014, Putnam had $153 billion in assets under management. Putnam has offices in Boston, London, Frankfurt, Beijing, Amsterdam, Tokyo, Singapore and Sydney. For more information, visit http://www.putnam.com.