Policy makers should support increased use of products that provide reliable lifetime income, such as income and drawdown funds, guaranteed pay-out plans and annuities, according to Robert Reynolds, president and chief executive officer of Putman Investments.
To foster confidence in such products, Reynolds (left) called on Congress to create an optional national insurance charter and a new lifetime income security agency empowered to approve assured lifetime income products. The new agency also would administer an industry-funded, risk-based national insurance fund to protect current and future retirees, much like the bank deposit insurance fund overseen by the Federal Deposit Insurance Corp.
In a speech at the Retirement Income Industry Association’s spring conference in Chicago on Tuesday, Reynolds also announced plans by Putnam to offer a suite of income-oriented funds that aim to help advisors work with retirees in developing strategies for monthly income flows, at varying levels of risk tolerance, to address their changing lifestyle and financial needs throughout retirement.
“Everyone focuses on ‘the number,’ which we can’t stand,” Reynolds said. “We structure it more like a paycheck, and calculate what is needed each month, rather than as a lump sum. Needs change in retirement, and calculating monthly income is the flexible way to address any changes that might arise.”
When commenting on his retirement income agency proposal, Reynolds warned that budget cutting advocates in Washington might be tempted to target the deferral of federal income taxes on contributions to defined-contribution plans, such as 401(k) plans, individual retirement accounts and variable annuities. Slashing or eliminating these tax incentives, Reynolds noted, would reduce the motivation to save at a time when many Americans already face a shortfall in their retirement savings and lack confidence in their ability to enjoy a secure retirement.