288201 6/14 Robert L. Reynolds President and CEO Putnam Investments and Great-West Financial The...
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288201 6/14 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
288201 6/14 Robert L. Reynolds President and CEO Putnam Investments and Great-West Financial The U.S. Retirement System: Challenges and Solutions The International
288201 6/14 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
Slide 2
2 288201 6/14 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). Selected major U.S. retirement legislation
1962Self-Employed Individuals Tax Retirement Act Keogh plans
1974The Employee Retirement Income Security Act (ERISA) IRAs
1978The Revenue Act of 1978 401(k) plans and SEPs 1997The Taxpayer
Relief Act Roth IRA 2006Pension Protection Act (PPA) Auto-features
and QDIAs in DC plans
Slide 3
3 288201 6/14 creating a hybrid system that combines revenue
from Social Security payroll taxes plus earnings from investments
in workplace savings plans Sources: S&P 500 data from Yahoo
Finance; and OASI and DI data from the Annual Statistical
Supplement, 2013. Combined OASI and DI contributions vs. S&P
500 (19702014) ($ Millions) Index value
Slide 4
4 288201 6/14 In private workplace savings, the rise of defined
contribution plans has shifted responsibility from institutions to
individuals Source: ICI (excluding annuities, except those in other
retirement plans). Percent of retirement assets, 19752012
Slide 5
5 288201 6/14 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 Source: Profit Sharing/401k Council of America. Usage of
key PPA-endorsed features
Slide 6
6 288201 6/14 and will help total U.S. retirement assets grow
from $19T to $25T by 2018 with IRAs and DC outpacing DB Sources:
Department of Labor, ICI, U.S. Census Bureau, Federal Reserve,
PBGC, EBRI, Cerulli Associates, Empirical Research Partners, Putnam
Analysis. Private DC includes 401(k)s, money purchase plans, profit
sharing plans, Keoghs, and Taft-Hartley DC plans. Public DC
includes Federal Thrift Savings plans, 403(b) and 457 plans. U.S.
retirement market assets ($B) 8.6% 5.4% 3.7% 4.0% 5.8% CAGR $10,041
$14,297 $18.9T $25.2T
Slide 7
7 288201 6/14 Real solutions in workplace savings are right at
hand Replacement percentages of pre-retirement income Sources:
Putnams Lifetime Income Study, 2014; and U.S. Census data estimates
(2012 Statistical Abstract, Table 690: Money Income of Households).
Average household replacement score 61% No access to workplace plan
Active in DC plan Automatically enrolled in plan Has auto
escalation Deferring 10%+
Slide 8
8 288201 6/14 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