Putnam’s Lifetime Income Analysis Tool is designed to help the company’s 401(k) plan participants project how much income their retirement savings may generate in retirement, compared with what they may need and, if a savings shortfall is estimated, offer actionable next steps.
The tool includes a redesigned Web site that introduces a new landing screen. Instead of showing a participant his investment allocation, investment yield to date, or information about his company’s retirement plan when first logging in, the new Putnam site shows how participants’ account balance and current savings rate will translate into a monthly retirement income, according to Ed Murphy, managing director, head of defined contribution, introducing the tool at Putnam’s Retirement Income Summit in New York City.
The tool incorporates information such as age, salary, savings rate, and account balance to show how much a participant has in current savings, company match, and expected savings based on a continuation of current behavior. It then generates an image of whether a participant is on track to have a 75% replacement ratio in retirement.
Participants can play with various sliding rules on the same page to see how changing their deferral rate, expected age at retirement, or bond/equity allocation will affect their results. They can also decide whether to factor in anticipated Social Security payments in retirement and outside savings, and whether they want to calculate for a 75% or 90% likelihood of success (the program defaults to use 90%).
For those who need to make changes to catch up to meet their needs, the Lifetime Income Analysis Tool suggests deferral increases of 2% to 3%. Highlighted with a gold star on the deferral slider, the tool will tell a participant that the next step is to increase deferrals and, as the participant moves the slider, the page displays how the change affects the total retirement income picture, and in a side box, how it will reduce pre-tax pay and savings on a monthly basis.
Further, when the system shows a suggested deferral increase, it only takes a participant three clicks to make the change. “This tool has the ability to change how much someone is contributing to their plan in three clicks,” noted Dallas Salisbury, president of the Employee Benefit Research Institute. “Last time I made that change in my 401(k) plan, it took 21 clicks.”
Although online tools have not traditionally been very successful, Jeffrey Carney, senior managing director, head of global marketing, products and retirement at Putnam, said he believes that because the tool is simple it will encourage engagement. The company is also going to be working with advisers and consultants to encourage usage among plan participants, he noted.
By Alison Cooke Mintzer