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Robert L. Reynolds President and CEO Putnam Investments and Great-West Financial

Robert L. Reynolds President and CEO Putnam Investments and Great-West Financial. The U.S . Retirement System: Challenges and Solutions. The International Pension Conference of Montreal June 9, 2014.

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Robert L. Reynolds President and CEO Putnam Investments and Great-West Financial

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  1. Robert L. ReynoldsPresident and CEOPutnam Investments and Great-West Financial The U.S. Retirement System: Challenges and Solutions The International PensionConference of Montreal June 9, 2014

  2. Over the past 50 years, U.S. legislation has created a host of tax-advantaged vehicles for retirement savings… Source: ICI (excluding annuities, except those in other retirement plans).

  3. …creating a “hybrid” system that combines revenue from Social Security payroll taxes plus earnings from investments in workplace savings plans Combined OASI and DI contributions vs. S&P 500 (1970–2014) ($ Millions) Index value Sources: S&P 500 data from Yahoo Finance; and OASI and DI data from the Annual Statistical Supplement, 2013.

  4. In private workplace savings, the rise of defined contribution plans has shifted responsibilityfrom institutions to individuals… Percent of retirement assets, 1975–2012 Source: ICI (excluding annuities, except those in other retirement plans).

  5. …and with the passage of the Pension Protection Act of 2006, workplace plan design has come to the forefront… • Enabled auto-enrollment and savings escalation • Endorsed defined lifecycle/balanced default options • Provided legal safe harbor for employers Usage of key PPA-endorsed features Source: Profit Sharing/401k Council of America.

  6. …and will help total U.S. retirement assets grow from $19T to $25T by 2018 — with IRAs and DC outpacing DB U.S. retirement market assets ($B) $25.2T CAGR 5.8% 4.0% $18.9T 3.7% 5.4% $14,297 $10,041 8.6% Sources: Department of Labor, ICI, U.S. Census Bureau, Federal Reserve, PBGC, EBRI, Cerulli Associates, Empirical Research Partners, Putnam Analysis. Private DC includes 401(k)s, money purchase plans, profit sharing plans, Keoghs, and Taft-Hartley DC plans. Public DC includes Federal Thrift Savings plans, 403(b) and 457 plans.

  7. Real solutions in workplace savings are right at hand Replacement percentages of pre-retirement income Average household replacement score 61% Sources: Putnam’s Lifetime Income Study, 2014; and U.S. Census data estimates (2012 Statistical Abstract, Table 690: Money Income of Households).

  8. What we believe • The DC system will be the primary source of retirement income for most U.S. families • We must also find ways to secure access to workplace savings for all • Better outcomes can be achieved — indeed, are being achieved — through automatic plan design and income-oriented guidance for participants • Apart from participation, the most powerful driver of success is raising savings rates — to 10%+ of their earnings

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