PUGIX Putnam Global Utilities Fund Class A (MM)

Almost 40 percent fewer Americans expect to fully fund their IRAs this year than did in 2009, according to the results of a survey of 1,000 Americans released today by Putnam Investments. Only one in seven (14%) survey respondents plan to fully fund their IRAs in 2010, versus 23 percent who fully funded an IRA in 2009. More than half of those who did not fund their IRA for 2009 said they either lacked the cash to invest or preferred to keep the cash available for other reasons, and another quarter were worried about market risk.

Americans also are not planning to convert from traditional IRAs to Roth IRAs, in spite of a new tax law change that allows higher-income investors to perform Roth conversions. Only 14 percent of respondents were considering converting some or all of their traditional IRA assets to a Roth IRA either this year or next, with a majority (56%) saying they definitely would not convert. Other findings from the Putnam research include:

• Two-thirds of respondents (67%) said they are not confident that the taxes they would pay now because of a Roth IRA conversion will produce better results in the future. Nearly as many (61%) say they do not want to pay the taxes required by a Roth conversion because of previous investment losses, and 56 percent said they simply cannot afford the costs of a Roth IRA conversion.
• Investor skepticism is underscored by the fact that two in five respondents (41%) think they will have more money in the long run if they pay taxes later with a traditional IRA rather than converting to a Roth IRA and paying taxes now (26%).
• The lower IRA savings come even as three-fifths of the survey respondents (58%) report they are not saving more overall this year than last, even about the same number (62%) thinks their savings are unlikely to provide them with a sizeable retirement nest egg.

Survey Finds Confusion, Uncertainty About IRA Investing

A lack of knowledge about both traditional and Roth IRAs could play a role in Americans’ use of these investment vehicles. Nearly a third of respondents (29%) who rated themselves as “expert” or “educated” about IRAs did not realize they would be required to pay ordinary income tax on each dollar converted to a Roth IRA. An equal number (33%) did not realize that retirement withdrawals of principal and income are free of income tax for Roth IRAs. A fifth (21%) admit that they are unsure of how a Roth IRA differs from other IRAs.

Some Americans also have unrealistic expectations about what their IRAs can generate in retirement income. For example, nearly a third (28%) of those with IRA assets of $100,000 or more expect that their IRAs would generate $100,000 or more in annual retirement income.

“The economic turmoil of recent years has made clear to Americans the uncertainty of their prospects for a secure retirement. They understand the need to save more, but are finding it difficult to do so, leaving them with a significant retirement income gap,” said Jeffrey R. Carney, Head of Retirement and Global Products at Putnam Investments. “Government, employers and the financial services industry need to continue to find new strategies to help workers increase their retirement savings through education, guidance and retirement income tools. Americans need to make the most of their IRAs, 401(k) plans and other savings vehicles that are built to provide significant contributions to their lifetime income.”

Americans are taking some positive steps to prepare for retirement.

More than one-quarter of survey respondents (26%) expect to use their tax refund this year to pay down debt, while 22 percent plan to save it for a rainy day and 11 percent expect to invest it in a retirement account. Fewer than one in 10 expects to splurge on a vacation, dinner or some other personal extravagance.

Investments Yielding Positive Results Over Time Favored for IRAs

When asked what types of investments they felt most comfortable including in their IRA, half (50%) cited an investment designed to provide positive, steady returns.

Putnam Investments and Retirement

Among the other products and services Putnam has introduced to assist retirement plan participants is a Lifetime Income SM Analysis Tool, which shows 401(k) plan participants project how much income their current retirement savings may generate in retirement compared to what they may need, and then offer actionable next steps.

The findings of the Putnam survey underscore importance of the company’s deepened commitment to the retirement market, including the launch of a content-rich Roth IRA Conversion Resource Center targeted at advisors, brokers, and other financial professionals; an interactive Roth IRA Conversion Evaluator to assist investors in determining whether they should convert from a traditional IRA to a Roth IRA; and a new blog Putnam has created to keep investors and financial professionals alike informed about developments in Roth IRAs (www.rothirablog.com).

Putnam RetirementReady® Funds, the firm’s suite of 10 target-date/lifecycle retirement funds, recently added target Absolute Return Funds* to its mix of underlying investments. RetirementReady Funds became the only suite of lifecycle funds to integrate absolute return strategies, which seek positive returns over time with less volatility than more traditional mutual funds. Employed in retirement portfolios, absolute return strategies are intended to pursue positive returns in up and down markets, to protect against the harmful effects of adverse investment returns, and to reduce volatility, particularly for investors in or near retirement.

Putnam also has expanded the services it offers to retirement plans and developed products to meet the needs of those planning for or already in retirement. The firm has created a platform that provides flexible and scalable services and solutions for advisors, consultants, and their plan sponsor clients in every segment of the retirement market.

Putnam Consumer Retirement Survey

The survey findings, which were conducted for and paid for by Putnam Investments, are based on a representative nationwide sample of 1,001 U.S. adults, age 22 and older, polled online April 2–7, 2010, by Insight Express.

About Putnam Investments

Founded in 1937, Putnam Investments is a leading global money management firm with over 70 years of investment experience. The firm was recently ranked #1 out of 61 fund families based on its funds’ performance during 2009 in a Lipper/Barron’s Fund Families Survey and named “Mutual Fund Manager of the Year” by Institutional Investor. At the end of March 2010, Putnam had $118 billion in assets under management. Putnam has offices in Boston, London, Frankfurt, Amsterdam, Tokyo, Singapore, and Sydney. For more information, visit putnam.com.

Putnam mutual funds are distributed by Putnam Retail Management.

* Putnam’s target Absolute Return Funds are not intended to outperform stocks and bonds during strong market rallies.

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