Putnam followed a sample of 10,000 participants who interacted with the firm’s Web-based Lifetime Income 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, over a two-month period.
Of those participants, 34% of them made changes to the amount of income they deferred to retirement savings. Of those who made changes, 80% increased their savings rates. The average savings rate increase was approximately 23%, from 7% of income to 8.6%.
Putnam is trying to make the Lifetime Income Analysis Tool the “center point of everything,” said Edmund F. Murphy III, Director, Defined Contribution Services to PLANSPONSOR. One of the enhancements the company is working on is to have gap analysis shown on participant statements, as well as to integrate the tool with the enrollment and loan processes.
The company’s goal is to do more to increase participants interacting with the tool, something that can be helped by coordination of the effort between Putnam, plan sponsor clients, and financial intermediaries, Murphy noted. “The most critical measure of success or failure of a retirement plan is retirement readiness,” he said.
Putnam is also working on a consolidated view of the participant usage of the tool for the plan sponsor, as some of the more paternalistic plan sponsors are beginning to use retirement readiness as a plan benchmark measure, Murphy said.
Putnam launched the Lifetime Income Analysis Tool in January 2010 (see Putnam Introduces Retirement Income Calculator) 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.