« Back | Press release: May 23, 2012

Critical Need For Americans To Weigh Future Monthly Health-Care Costs Against Expected Income In Retirement, According to Experts at Putnam Investments-Hosted Forum

Working Americans Indicate Little Confidence in Knowledge of Money Needed for Health Care in Retirement, Recent Survey Suggests

Putnam to Provide 401(k) Advisors, Plan Sponsors and Participants in Fall 2012 with a Personalized Projection of the Impact of Health Expenses on Future Monthly Retirement Income

As working Americans face the challenge of saving enough for a secure, dignified retirement, most, simply do not know how much they will need to cover what will likely be one of the largest, most worrisome future expenses: health-care costs, a dynamic, unwieldy variable that is certain to grow in significance over time.

At an event today in New York City, where a series of industry experts examined the intersection of health-care costs and needed monthly income in retirement, Putnam Investments announced that this fall, it will be bringing clear focus and greater awareness of health-care costs to retirement plan sponsors, participants and advisors through a new feature that will be available in its 401(k) offering.

“The integration of health and wealth should be at the core of future workplace savings plans, public policy and financial planning practice,” explained Putnam Investments President and CEO Robert L. Reynolds. “Working Americans need to have some way to gauge their potential future health spending needs and personalize those estimates to suit their own life circumstances. Their employers — the plan sponsor community — want to help individuals get a handle on these costs and prepare for them while there is still time and opportunity. Financial advisors and consultants, for their part, who play a central role in retirement planning, will be able to provide even greater perspective by incorporating health care into their advice and planning.”

Opportunity and Obligation to Build ‘Real Awareness’
Reynolds cited research sponsored by Putnam — and conducted by Brightwork Partners LLC — that shows that knowledge about retiree health-care expenses among American households is minimal, while concern about it is surging. Nearly 70% of respondents in a survey of almost 4,000 working adults indicated little to no confidence in knowing how much money they will need for health-care expenses in retirement.

“For all the talk and worry about health care, we have seen very little by way of solutions or even baseline guidance beyond macro-estimates of lifetime costs, which leave many people just frozen with fear,” he noted. “It makes no sense at all to talk about retirement savings or lifetime income provision without expressing the numbers in a monthly context and factoring in health-care expenses.

“The retirement marketplace has an incredible opportunity — and obligation — to help build real awareness of some of the critical success factors affecting Americans’ ability to create better financial outcomes for themselves in their retirement,” Reynolds continued. “We believe workplace savers need to have an understanding of one of the largest — and most worrisome — costs they will face in retirement, namely their projected monthly health-care expenses.”

Health Meets Wealth in the 401(k) Plan
At the forum entitled, “Health, Wealth, and the Future of Retirement,” hosted by Putnam, the firm provided a preview of a key new element — personalized monthly health-care cost projections — being incorporated into its acclaimed Lifetime IncomeSM Analysis Tool, which helps workers model how much monthly income their savings might generate in retirement and determine whether they are on track to maintain their current lifestyle once they stop working.

In the coming months, Putnam 401(k) plan sponsors will be able to provide their participants with a customized estimate of how large a slice of their expected future monthly income will be needed to cover their broad range of health-care costs in retirement, including itemized insight on medical, dental and pharmaceutical expenses, at different age points. The projections will be generated from individual participant data and cost models using proprietary actuarial-based guidelines and expressed as monthly costs.

“Building upon the success of our Lifetime Income Analysis Tool, which helps to translate accumulated and estimated future savings into the language of future monthly income for 401(k) participants, we will be offering a view of customized health-care costs through a similar lens, continuing to emphasize clarity, simplicity and the ability to take easy action,” said Edmund F. Murphy III, Head of Defined Contribution, Putnam Investments.

“We want to be able to give people a good, directional sense of a major expense that could swallow up a sizeable amount of future monthly retirement income savings, while they still have time to plan, prepare and take proactive steps, if needed, to try to bolster income for other potential financial needs in retirement,” Murphy said.

Empowering Plan Sponsors and Advisors
According to Murphy, a ‘‘new fiduciary standard’’ is emerging in the retirement industry, driven by a growing focus on income replacement in retirement and the various factors that impact its outcome. “As the 401(k) industry continues to mature and evolve at a time when a financially successful retirement for many is in question, those driving workplace savings efforts have a more critical role than ever. Armed with a vehicle to help individuals better grasp the relationship between their monthly health-care costs and potential income available in retirement, plan sponsors and advisors will be empowered with information that is sure to trigger much-needed dialogue, and may also spur action by participants, at a point when they can still make strategic planning decisions,” Murphy pointed out.

“The end game for everyone involved in this process — plan sponsors, providers, advisors and, naturally, the participants themselves — is to further strengthen and fortify the chances for individuals to be able to enjoy a secure, dignified retirement after a lifetime of working,” Murphy continued. “We aim to keep aggressively moving the ball toward this ultimate goal.”

About Putnam Investments
Founded in 1937, Putnam Investments is a leading global money-management firm with nearly 75 years of investment experience. At the end of April 2012, Putnam had $124 billion in assets under management. Putnam has offices in Boston, London, Frankfurt, Amsterdam, Tokyo, Singapore and Sydney. For more information, visit putnam.com.

This information is not meant as tax or legal advice. Please consult with the appropriate tax or legal professional regarding your particular circumstances before making any investment decisions.

IMPORTANT: The projections, or other information generated by the Lifetime Income Analysis Tool regarding the 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 tool 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. You are advised to consider other assets, income, investment options, investment time horizon, your income tax bracket, and risk tolerance when planning for specific investment goals. It is recommended that you consult a financial advisor for more information. It is important to note that the results from this tool are estimates based on what you input today. The results are not a guarantee of actual outcomes and will change as your inputs change.