It is one of a number of steps participants can take to improve their readiness for retirement and increase their confidence in their ability to make financial decisions. Robert Reynolds, Putnam’s chief executive, pointed out that lifetime income is only partly about actual income.
“Any 401(k) plan participant scores the same as people with household incomes of $175,000,” Reynolds said at a Putnam forum, “Health, Wealth and the Future of Retirement.” Reynolds called the rapidly rising poverty of senior Americans and the projected shortfall in Social Security trust funds “deeply disappointing developments.”
“We have to have healthy public systems, of course, and very healthy private systems,” Reynolds said.
The company’s survey of nearly 4,000 working Americans indicates that a critical factor in retirement readiness continues to be savings behavior. The best-prepared are active participants in a workplace savings plan, deferring at least 10% of income and using the services of a financial adviser. These workers indicated higher confidence in their ability to make financial decisions.
The decision to work with an adviser also had a material impact on Lifetime Income Scores, Reynolds said. Those who worked with an adviser had scores of 89 this year (a rise from last year’s score of 82), while those who did not work with an adviser scored 58 (a drop from last year’s score of 61).
The research examined behavioral tendencies, mortality factors, retirement and non-retirement assets, such as home equity, 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.
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