SOURCE: Putnam Investments

Putnam Investments

April 14, 2010 13:30 ET

Putnam Investments' CEO Reynolds: First Step to America's Fiscal Revival Is Social Security Solvency

BOSTON, MA--(Marketwire - April 14, 2010) -  In a speech today before the Detroit Economic Club, one of the world's foremost venues for business and government leaders, Putnam Investments President and Chief Executive Officer Robert L. Reynolds called for putting the country's fiscal house in order, beginning with making Social Security solvent. Reform of the nation's core retirement program, Reynolds said, could be the centerpiece of a transition for America away from an era of debt and deficits to a new economic model of higher savings and investment, strong new business formation and more rapid and sustainable economic growth.

In his remarks, Reynolds expressed strong optimism about America's near-term growth as the nation recovers from the recession and financial crisis. However, he also raised deep concerns about the longer-term risks posed to national solvency by massive federal deficits, the exploding national debt and the escalating costs of Social Security, Medicare, Medicaid and other entitlement programs. Reynolds noted that President Obama has acknowledged the severity of the country's fiscal risks by naming a bipartisan commission to find ways to lower the deficit.

"President Obama should charge his deficit reduction commission with focusing first on Social Security, the cornerstone of retirement for most Americans. Although Social Security faces a multi-trillion dollar deficit, its funding gap is much more manageable than that faced by healthcare programs such as Medicare and Medicaid," said Reynolds. "By crafting a package of revenue increases, benefit reductions and other changes to make Social Security solvent -- and then asking Congress to vote the plan up or down after the elections in November -- we could show that we can find common ground and address serious national problems."

Key results of a recent national retirement income survey conducted by Putnam Investments show that Americans support both Social Security reform, in fact, according to the study, nearly 70 percent believe that it is vital for politicians to act to close the Social Security gap. 

Reynolds outlined three constraints he would place on the commission's recommendations: First, there should be no impact on the benefits of current retirees or those within 10 years of full retirement age, since they have no time to adjust to changes. Second, the commission should not raise the payroll tax, since that would discourage job creation. Third, the commission should keep future retirement benefits intact for below-median income Americans.

In addition to restoring confidence in ability of the nation's leaders to meet challenges, Reynolds said that restoring solvency to Social Security would have tangible benefits such as greater global confidence in the dollar. Moreover, it would set the stage for an effort to address the nation's broader fiscal and economic challenges.

Beyond retirement reform, Reynolds called on Washington to adopt a series of creative, pro-growth policies to generate the higher national savings and investment needed for sustainable economic prosperity.

Reynolds said that reforms to the retirement system, along with targeted changes to the tax system, could build on the solid base offered by current workplace savings systems such as 401(k) plans and other defined-contribution programs. In addition to creating a more reliable, robust system of private retirement savings to complement Social Security, these steps would generate large new pools of capital for investment in the nation's economy.

As part of these reforms, Reynolds called for extending 401(k) plans and other workplace saving programs to the 78 million Americans -- roughly half the country's work force -- who are not currently covered by retirement plans. Reynolds advocated for adoption of the universal IRA proposed by the Obama Administration or a simplified low-cost version of the 401(k) plan. He also urged that existing workplace plans speed the implementation of the core elements of the Pension Protection Act of 2006 including automatic enrollment, savings escalation and guidance to qualified default investment options.

"The damage done to retirement savings by the market declines of 2008 has awakened many Americans to the realization that they are not as prepared for retirement as they had thought. Even as they acknowledge their own responsibility to save more, they see a role for government to help boost private savings," said Reynolds. "This recognition gives Congress and the president a once-in-a-generation opportunity to work with employers and the financial services industry to solve America's retirement savings challenge."

Putnam Investments and Retirement
The findings of the Putnam survey underscore the company's deepened commitment to the retirement market, including the launch of a content-rich Roth IRA Conversion Resource Center targeted at advisors, brokers and other financial professionals; an interactive Roth IRA Conversion Evaluator to assist investors in determining whether they should convert from a traditional IRA to a Roth IRA; and a new blog Putnam has created to keep investors and financial professionals alike informed about developments in Roth IRAs (www.rothirablog.com).

Putnam also has expanded the services it offers to retirement plans and developed products to meet the needs of those planning for or already in retirement. The firm has created a platform that provides flexible and scalable services and solutions for advisors, consultants, and their plan sponsor clients in every segment of the retirement market.

Among the other products and services Putnam has introduced to assist retirement plan participants is a Lifetime Income Analysis Tool which shows 401(k) plan participants project how much income their current retirement savings may generate in retirement compared to what they may need, and then offer actionable next steps.

Putnam RetirementReady® Funds, the firm's suite of 10 target-date/lifecycle retirement funds, recently added target Absolute Return Funds* to its mix of underlying investments. RetirementReady Funds became the only suite of lifecycle funds to integrate absolute return strategies, which seek positive returns over time with less volatility than more traditional mutual funds. Employed in retirement portfolios, Putnam Absolute Return Funds are intended to pursue positive returns in up and down markets, to protect against the harmful effects of adverse investment returns and to reduce volatility, particularly for investors in or near retirement.

Putnam Retirement Income Survey
The survey findings are based on a representative nationwide sample of 1,496 U.S. adults, age 22-plus, polled online from January 12 - 17, 2010, by Braun Research. The margin of error was +/-2.5 percent.

About Putnam Investments
Founded in 1937, Putnam Investments is a leading global money management firm with over 70 years of investment experience. The firm was recently ranked #1 out of 61 fund families based on its funds' performance during 2009 in a Lipper/Barron's Fund Families Survey and named "Mutual Fund Manager of the Year" by Institutional Investor. At the end of March 2010, Putnam had $118 billion in assets under management. Putnam has offices in Boston, London, Frankfurt, Amsterdam, Tokyo, Singapore, and Sydney. For more information, visit putnam.com.

Putnam mutual funds are distributed by Putnam Retail Management.

* Putnam's target Absolute Return Funds are not intended to outperform stocks and bonds during strong market rallies.

Contact Information