Putnam's Reynolds to Congress: To grow the economy, help boost savings

Study tied to preserving tax incentives for 401(k) plans

Jun 25, 2014 @ 12:01 am

By Mark Schoeff Jr.

Putnam Investments chief executive Robert Reynolds has been proselytizing for years about the need for Americans to save more for retirement and the importance of workplace programs to help them do it.

Now he has research at hand that he says backs up his point and could wake up lawmakers to the necessity of bolstering savings.

A report released Tuesday in Washington shows that increasing the household savings rate not only would lead to more secure retirement for Americans, it also would substantially boost economic growth.

The current U.S. household savings rate of 3.8% is projected to fall to 3% in the 2030s. If the rate were increased to between 5% and 9%, economic output per capita would rise by $3,500 and the economy overall would grow by $7 trillion over the next 25 years, according to the study by Oxford Economics.

Armed with that evidence, Mr. Reynolds will try to persuade members of Congress not to cut retirement-savings tax incentives for 401(k) plans to help balance the budget or fund other spending. He said members of Congress should look instead for ways to bolster workplace retirement savings programs through automatic enrollment and escalation.

“We're hoping this report will change the politics of savings and encourage policymakers to do more to enhance savings,” Mr. Reynolds said. “If we can convince lawmakers that savings will increase economic growth, then the politics of this issue will change.”

In addition to Putnam, the study was sponsored by LPL Financial, Bank of America Merrill Lynch, John Hancock Financial, Natixis Global Asset Management, the American Society of Pension Professional and Actuaries, the Financial Services Roundtable, the New England Council, the Aspen Institute, the U.S. Chamber of Commerce and AARP.

The array of backers underscores the importance of helping more Americans gain access to savings programs at their jobs, said Mr. Reynolds, who is also president and CEO of Great-West Lifeco U.S. Doing so would help low-income workers begin to build nest eggs.

By raising the profile of the savings issue among lawmakers, advocates are trying to extricate it from the budget debate, according to Gary Koenig, vice president of economic security at the AARP Public Policy Institute.

“We hope we'll be moving discussion away from 'How do we reduce the deficit?' to 'How do we increase economic growth and retirement security overall?'” Mr. Koenig said.

The study said that Congress should stop trying to curb retirement-savings incentives to generate tax revenue.

“This misguided line of thinking effectively pits Americans' personal solvency against national solvency — even as we face the widely acknowledged risk of a retirement savings shortfall for millions of workers,” the study states.

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