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Consistent Saving, Access to Financial Advice and Workplace Retirement Plans Are Prime Drivers of Successful Retirement Preparation at All Income Levels, New Research from Putnam Investments Finds

In a recent survey of nearly 3,300 working Americans to help determine current levels of retirement preparedness, Putnam Investments identified three key variables that drive successful outcomes. The most powerful factor, regardless of income level, is a pattern of disciplined, long-term savings and investing. Households with access to a workplace savings plan and those that work with financial advisors were also significantly better positioned for retirement than their counterparts.

The Putnam Lifetime Income Score SM research is believed to be one of the most thorough and comprehensive studies conducted to determine retirement preparedness of Americans. The research looks at behavioral tendencies, mortality factors and current retirement and non-retirement assets, such as investment securities, annuities and cash value life insurance, to estimate the level of income that U.S. households are currently on track to replace in retirement. Overall, the study found that American households are on track to replace 64% of their current income in retirement.

“While promising in some areas, these findings tell us — clearly — that U.S. households still need to save more to reach sufficient income for successful retirement. It is critically important to strengthen public and private retirement systems and broaden access to workplace savings for all working Americans,” said Putnam Investments President and CEO Robert L. Reynolds.

“The data also demonstrates, unmistakably, the valuable role that financial advice plays in helping individuals prepare for retirement, as well as the behavioral changes needed for success. Overall, we hope this body of research will encourage individuals, their advisors, employers and policy makers to take the steps needed to achieve greater retirement security for this nation,” noted Reynolds.

The research also provided a window into the overall importance of Social Security to the country’s income replacement trajectory:

  • The national Lifetime Income Score of 64% replacement dives to 30% when Social Security is not factored into the mix;
  • Without Social Security, households with income below $50,000 are on track to replace barely 17% of their pre-retirement income;
  • Individuals age 50 to 65 have Lifetime Income Scores of 60% replacement, but without Social Security that score drops to 28%; and,
  • The scores of young workers age 18 to 34 drop from 73% replacement to 33% if Social Security is removed from the equation.

“The American dream of a dignified and secure retirement is at risk for millions of people. The Putnam Lifetime Income Score analysis suggests that if we want to avoid a major increase in elderly poverty over the next generation, we have to act now to make Social Security solvent and to raise personal retirement savings across the board. Enacting auto-IRA payroll deduction to help make workplace savings programs available to all working Americans and maintaining tax incentives to encourage strong participation by individuals in 401(k) plans and IRAs more broadly are significant pieces of solving the retirement puzzle as well,” said Reynolds.

Key findings of the study include:

  • Individuals who appeared to be on the best track to replace current income (those on track to replace 100% or more of their pre-retirement income) and individuals who seem to be the worst positioned (those on pace to replace less than 45%), have exactly the same mean household income — $93,000 annually. A clear difference maker appears to be behavior around savings.
  • The significance of employer-sponsored retirement plans was underscored by the study. The best-prepared Americans are participants in 401(k) or other defined-contribution plans who currently are contributing 10% or more of their income to their plan: They have a Lifetime Income Score of 124%. Those who are currently contributing 4% to 10% of their income to their retirement plan still score 84% replacement. But those who do not defer any of their income scored only 58%.

    The least-prepared Americans are households that are not eligible for an employer-based retirement plan, currently nearly half of the population, which have an average Lifetime Income Score of 46%. Those who are not eligible for employer-based plan, are even further unprepared for retirement if Social Security is excluded, as their overall score plummets from 46% to 8%.
  • Demonstrating the value of professional advice, those with a paid advisor had a Lifetime Income Score of 82%, while those without a paid advisor scored 61%. Those with an advisor scored higher than those without an advisor at every level of household income. Furthermore, those with a paid advisor still managed to score 51% without Social Security, while those without an advisor scored just 23% without Social Security.
  • Higher Lifetime Incomes Scores are closely correlated with retirement confidence. Those with Lifetime Incomes Scores of 100 or more are far more confident that they know how much money they will need for retirement and that they are financially ready for retirement than those with scores of 45% replacement or below. They are also more likely to expect that they will live as well or better in retirement than they did while working, that they will have enough to pay for healthcare and that they will be able to leave a legacy to their heirs than those with lower Lifetime Income Scores.
  • The study also found that American workers are realistic about their retirement income prospects, with few deluding themselves about their outlook. One third of Americans say they are considering delaying retirement beyond their original target age, including majorities of those currently age 55 to 59 and age 60 to 65; half of America’s workers say they expect to work at least part time in retirement; four in 10 say they will have to reduce their standard of living in retirement; and, one in four fears running out of money entirely in retirement.
  • Men are much more prepared for retirement than women. Men averaged a Lifetime Income Score of 73%, while women scored 60%. Women are also far more reliant on Social Security – they scored 21% once Social Security was removed from the equation – compared with men, who scored 41%.

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 the first quarter of 2011. The survey of 3,290 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 Institute

Putnam Institute is a research and educational organization funded by Putnam Investments. Its focus is primarily on investment theory and practice related to retirement and educational savings and the provision of lifelong income. It aims to critically examine key investment theories, strategies and assumptions and suggest changes that can achieve better outcomes for companies, institutions, plans sponsors, investment advisors and individual investors. The full body of current research from Putnam Institute is available at

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 May 2011, Putnam had $129 billion in assets under management, including mutual fund assets of $70 billion and institutional assets of $59 billion. Putnam has offices in Boston, London, Frankfurt, Amsterdam, Tokyo, Singapore and Sydney. For more information, visit


Putnam Investments
Jon Goldstein, 617-760-1127
516-946-5598 (cell)
Laura McNamara, 617-760-1108
978-505-0524 (cell)
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