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Not FDIC Insured

May Lose Value

No Bank Guarantee

Not FDIC Insured

May Lose Value

No Bank Guarantee

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Topics for today• 5 key challenges to prepare for in retirement• Achieving a successful retirement• Putting an income plan into practice

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Five challenges we can prepare for

• Longevity• Inflation• Health-care costs• Public policy changes• Investment risks and volatility

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65 70 75 80 85 90 95 100+

Longevity: Plan on spending25 to 30 years in retirement

Source: National Center for Health Statistics, U.S. Life Tables, 2005. Most recent data available.

Age

Your lifespan probability after reaching age 65

Living to age 83Probability: 56%Living to age 83Probability: 56%

Living to age 89Probability: 31%Living to age 89Probability: 31%

Living to age 94Probability: 14%Living to age 94Probability: 14%

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2% 4% 6%

Even low levels of inflation make a difference over time

• 30 years• $50,000 income

Amount needed to maintain purchasing power:

$90,568

$162,169

$287,174

Inflation rate

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1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

Health-care costs outpacing inflation and earnings

• A couple age 65 retiring in 2013 needs over $200,000 in savings to fund healthcare needs in retirement

– Fidelity Consulting Services, 2011

Source: Kaiser Family Foundation, April 2012.

Health insurance premiums

172%

Workers’ earnings

47%Overall inflation

38%

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What about Social Security?

Source: Social Security Administration 2012 Annual Report.

1950 Today Today 2033

There were 16 U.S. workers for each Social Security beneficiary

2.8 workers for each beneficiary

Benefits owed currently exceed taxes collected

The Social Securitytrust fund willbe exhausted

$$$$ $0$0

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0

20

40

60

80

100

Where are income taxrates headed?

This chart reflects the maximum federal income tax rate at each year-end.Source: Internal Revenue Service, 2012.

U.S. federal income tax rates, 1962–2013 (%)

Tax

rate

(%)

1962

2013

Kennedytax cuts Tax

Reform Act of ’86

Bush/Clintontax hikes

Bushtax cuts

Bush tax cuts extended

Fiscal cliff deal

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Achieving a successful retirement

• Diversify to manage volatility and achieve growth

• Make sure you’re not withdrawing too much• Consider adding guaranteed income• Be smart about taxes• Address other potential risks

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Choose the rightwithdrawal rate

This example assumes a 90% probability rate. These hypothetical illustrations are based on rolling historical time period analysis and do not account for the effect of taxes, nor do they represent the performance of any Putnam fund or product, which will fluctuate. These illustrations use the historical rolling periods from 1926 to 2012 of stocks (as represented by an S&P 500 composite), bonds (as represented by a 20-year long-term government bond (50%) and a 20-year corporate bond (50%)), and cash (as represented by U.S. 30-day T-bills) to determine how long a portfolio would have lasted given various withdrawal rates. A one-year rolling average is used to calculate performance of the 20-year bonds. Past performance is not a guarantee of future results. The S&P 500 Index is an unmanaged index of common stock performance. You cannot invest directly in an index.

0

10

20

30

40

50

Years

Percentage of your portfolio’s original balance withdrawn each year

How long would your money have lasted?

10%will last

10 years

9%will last

11years

4%will last

33 years

5%will last

20 years

6%will last

16 years

7%will last

13 years

8%will last

12 years

3%will last

50 years

Stocks60%

Bonds30%

Cash10%

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Address longevity risk

Mix 20 years 30 years 40 years

Conservative20% Stocks50% Bonds30% Cash

Balanced60% Stocks30% Bonds10% Cash

Growth80% Stocks20% Bonds0% Cash

Historical success of three asset mixes(assumes 5% withdrawal rate, adjusted for inflation annually)

These illustrations are based on a rolling historical time period analysis and do not account for the effect of taxes, nor do they represent the performance of any Putnam fund or product, which will fluctuate. These illustrations use the historical returns from 1926 to 2012 of stocks (as represented by an S&P 500 composite), bonds (as represented by a 20-year long-term government bond (50%) and a 20-year corporate bond (50%)), and cash (U.S. 30-day T-bills) to determine how long a portfolio would have lasted given various withdrawal rates. A one-year rolling average is used to calculate performance of the 20-year bonds. Past performance is not a guarantee of future results. The S&P 500 Index is an unmanaged index of common stock performance. You cannot invest directly in an index.

96%

96%

76%

79%

54%

68%

89% 3%27%

80%–100% probability60%–79% probability0–59% probability

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When you retire can make a big difference

• Assumptions– $1 million nest egg– 5% withdrawn annually and increased each year to keep up with

inflation– Invested in a portfolio of 60% stocks, 30% bonds, and 10% cash– Results over a 10-year time frame

Sequence of returns risk refers to adverse effect negative investment returns in the early stages of retirement can have on a nest egg

Retire in 1980 Retire in 1990 Retire in 2000

$1M

$1,731,989 $1,861,592

$472,238

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Consider diversifying more broadly in retirement

U.S. large-cap stocks

Commodities

U.S. small-cap stocks

U.S. high-yield bonds

Developed country

international stocks

Emerging-market stocks

U.S. Treasury bills

Global investment

grade bonds

Inflation-protected securities

Hedge funds

Real estate investment

trusts

U.S. growth and value stocks

Floating rate bank loans

U.S. investment grade bonds

Emerging-market bonds

Traditional asset classes are defined as those included in traditional balanced portfolios, such as stocks, bonds, and cash, and that have been widely owned by individual investors since the post-war emergence of modern portfolio theory. Modern asset classes are specialized investments that were created or have become more accessible since the advent of broader market participation by individual investors due to tax-advantaged retirement saving

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Consider adding guaranteed income

Example• Balanced portfolio –

50% stocks, 40% bonds, 10% cash

• 5% withdrawn annually• Guaranteed income

based on current immediate annuity rates

69%

93%

Probability of portfolio survival over 30 years

No guaranteed

income

25% guaranteed

incomeThis example is based on rolling historical time period analysis and does not account for the effect of taxes, nor does it represent the performance of any Putnam fund or product, which will fluctuate. Assumes historical rolling periods from 1926 to 2012 of stocks (as represented by an S&P 500 composite), bonds (as represented by a 20-year long-term government bond (50%) and a 20-year corporate bond (50%)), and cash (as represented by U.S. 30-day T-bills) to determine how long a portfolio would have lasted given various withdrawal rates. A one-year rolling average is used to calculate performance of the 20-year bonds. Guaranteed income is based on a single premium, immediate annuity for a 65-year-old male assuming single life expectancy. Past performance is not a guarantee of future results. The S&P 500 Index is an unmanaged index of common stock performance. You cannot invest directly in an index.

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Pay attention to taxes

Type of income Taxability

Social Security May be partially taxable as ordinary income

Pension income Taxed as ordinary income

IRA and 401(k) distributions Ordinary income rates

Dividend income 20% maximum rate

Long-term capital gains 20% maximum rate

Roth IRAs Not subject to taxation

Liquidation of investment principal Not subject to taxation

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Use a Roth strategy to control your tax bill

• Source of tax-free income in retirement– Access to tax-free source of income provides more

options on where to draw income from• No mandatory withdrawals at age 70½• Having a portion of retirement savings in a

Roth IRA can provide a hedge against the threat of rising taxes in retirement

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Preserve your wealth in retirement through tax efficient withdrawals

Retirement situation Proposed course of action

Lower marginal tax rate Draw from traditional retirement accounts to maximize use of lower relative tax bracket, which may help to reduce RMDs at age 70½

Higher marginal tax rate Use tax-free or taxable assets to avoid higher income tax rates and potentially take advantage of lower capital gains rates

Significant appreciation in a taxable account

If leaving an inheritance, preserve taxable assets to take advantage of “stepped-up” cost basis at death

Working in retirement Avoid traditional retirement accounts, which will increase overall income (higher income could trigger taxes on Social Security benefits)

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Address other specific risksPost-retirement risk Risk management tool

Unexpectedhealth-care costs

Medigap supplemental coverage orhealth-care “emergency fund”

Loss of ability to live independently

Long-term-care insurance or health-care “emergency fund”

Catastrophic medical orlong-term-care costs Life or long-term-care insurance

Lawsuits or creditors Trusts

Spending the children’s inheritance

Life insurance/irrevocable lifeinsurance trust

Inability to fulfillcharitable intent

Charitable remainder trust orcharitable annuity

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Putting an income plan into practice

• Expense approach:Matching income sources with expenses

• Time-frame approach:Considering a bucket strategy

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Match potential sources of income to expenses in retirement

Essential expenses • Annuities• Social Security• Dividends• Pension income• Interest• Required minimum distributions

Discretionary expenses

• Employment income• Portfolio withdrawals• Personal savings

Unforeseen expenses

• Real estate• Life insurance• Long-term-care insurance

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Consider a bucket approach

• Growth stocks/funds• Real estate• Commodities• Longevity insurance

• Bonds• Deferred annuities• Absolute return funds• Asset allocation funds,

balanced funds

• Cash• CDs/money market• Short-term bonds• Immediate annuities• Social Security/pension

income• Wages

Inflation hedge, address longevity risk

Mix of growth and income, replenish short-term

bucket, guard against market volatility

Meet immediate cash-flow needs, emergency fund,

etc.

Long-term income (10+ years)

Mid-term income (2–10 years)

Short-term income (0–2 years)

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Closing thoughts• The retirement landscape will continue to

evolve• It’s critical for investors to prepare for certain

(and uncertain!) risks• A thoughtful income strategy can help you

address these challenges and attain the lifestyle in retirement you desire

• Meet with your financial advisor to assess your personal situation

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Additional resourcesBooks

• Longevity Revolution: As Boomers Become Elders, Theodore Roszak

• AgeQuake, Paul Wallace• Age Power: How the 21st

CenturyWill Be Ruled by the New Old,Ken Dychtwald, Ph.D.

• We're Not in Kansas Anymore: Strategies for Retiring Rich in a Totally Changed World,Walter Updegrave

• How Not to Die Broke at 102,Adriane Berg

On the web• AARP, www.aarp.org• Social Security

Administration, www.ssa.gov• American Savings Education

Council, www.asec.org• ElderWeb,

www.elderweb.com• Medicare, www.medicare.gov• National Association of Home

Care Providers, www.nahc.org

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A BALANCED APPROACH

A WORLD OF INVESTING

A COMMITMENT TO EXCELLENCE

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Investors should carefully consider the investment objectives, risks, charges, and expenses of a fund before investing.

For a prospectus, or a summary prospectus if available, containing this and other information for any Putnam fund or product, call your financial representative or call Putnam at 1-800-225-1581. Please read the prospectus carefully before investing.

Putnam Retail Management putnam.com

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Not FDIC Insured

May Lose Value

No Bank Guarantee