Putnam Investments has released a series of three new retirement income funds and paired it with a planning tool for financial advisers.
Joining fellow asset management firms that recently have drafted annuity-free retirement income products, Putnam Investments has released a series of three new retirement income funds and paired it with a planning tool for financial advisers.
Putnam's Retirement Income Fund Lifestyle 1, 2 and 3 are ranked based on risk tolerance and use a combination of strategies to generate income.
Lifestyle 1 is the new name for the firm's RetirementReady Maturity fund — the final fund in its target date series. It combines Putnam's Absolute Return 100, 300 and 500 funds, its Asset Allocation: Conservative portfolio and its money market fund. The moderate Lifestyle 2 combines the Absolute Return 100, 300, 500 and 700 funds, domestic and international equities, fixed income and convertible securities.
Finally, the aggressive option, Lifestyle 3, the renamed version of the Putnam Income Strategies Fund, uses the Absolute Return 700 fund, domestic and international equities, as well as fixed income and convertibles.
Investors can combine aspects of all three funds for something customized, and they can also use the firm's planning tool, which will give retail advisers a range of customized drawdown strategies, said Robert L. Reynolds, Putnam's chief executive.
Contrary to the expectations of some in the industry, Putnam did not pair up with its sister company Great-West Life & Annuity Insurance Co. to release an income product. Instead, advisers will use the tool to select the right fund and figure out an appropriate withdrawal rate, while weighing in the retiree's other assets.
A couple of other firms recently have come up with annuity-free strategies, including Financial Engines Inc. and Dimensional Fund Advisors LP. However, these are managed-account solutions that work within plans. Putnam's new funds can act as a continuation of target date funds.
“One of the challenges of the industry is how to prevent those excessive withdrawals, and there are things we're working on that try to accomplish that,” Mr. Reynolds said. “This provides a realistic, simple way to provide a lifetime-income strategy, and for some, it might be a change in their lifestyle.”
The planning tool gives Putnam a leg up with financial advisers, but drawing down from retirement income funds is nothing new, said Josh Charlson, senior mutual fund analyst with Morningstar Inc. He noted that ING Groep NV has a product that gives different retirement income options at the end of its target date fund series.
“I think it's similar to what's out there with other retirement income funds, and they're just creating options for investors when they reach retirement,” he said.
The success of Putnam's new suite of funds depends on how the strategy's executed and how smoothly the firm can deliver the employee from the retirement plan into the distribution phase.
“You need some good communication and to engage participants so that they talk to advisers and get assistance in choosing the right income fund,” Mr. Charlson added. “Because the adviser plays a big role in distribution, they have an opportunity to make it successful.”
