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Putnam Investments CEO Bob Reynolds has not been shy about pushing to fix America's broken retirement savings system. And now, he's offering three steps that could shore up retirement security while conducting an online campaign to keep the conversation going on retirement security in the U.S.
Believing that today's retirement savings challenge is too big for any one company or industry to solve, Reynolds has launched a Retirement Savings Challenge that asks people to comment on America's existing workplace savings plans "because we believe they can become a more reliable foundation for our nation's retirement system."
This isn't the first time that Reynolds has urged Americans to engage in the retirement debate. In May 2012 at a retirement security benefit forum in Washington sponsored by the Financial Services Roundtable, he said that though tax reform would be a top priority in 2013, both retirement planning officials and average Americans must press lawmakers also to put Social Security reform on top of their list.
"We should engage in a full debate [with lawmakers] on ways to make Social Security solvent," Reynolds said at the time.
Now, along with his Twitter feed, @RobertLReynolds, where he offers his thoughts on retirement security and the latest Putnam research, Reynolds is blogging regularly about issues such as savings access for all workers, how rising health care costs shape retirement planning and auto-enrollment features in 401(k) plans.
On the following page, read Reynolds' thoughts on three steps that could shore up retirement security.
Noting that "strengthening America's retirement system should have been a higher priority for years before 76 million baby boomers began to retire," Putnam CEO Bob Reynolds asserts in a blog post that nearly all American workers can improve their retirement preparedness with these three steps:
- Full-auto approach for all workplace savings. "Make the best practices endorsed by the Pension Protection Act of 2006 the new norm for all workplace savings plans," Reynolds advises. A full-auto approach would mean all automatic features for all workplace savings plans, including automatic enrollment, re-enrollment, escalation and default to qualified funds.
- Access to workplace savings for all workers. "Any worker paying FICA taxes should have access to a retirement savings plan at work," Reynolds writes. "Let's support the Auto-IRA, a bipartisan idea that was reintroduced into Congress this year, requiring all employers to offer, at a minimum, a payroll-deduction IRA with an opt-out provision for workers."
- Raise the bar on deferral rates. The Lifetime Income Score survey found that the most successful savers, meaning the people who are on track to replace 100% or more of their current income in retirement, are those who actively participate in a savings plan at work and save 10% or more of their salary.
Sluggish wage growth, Reynolds acknowledges, deters workers from saving more. But he believes that workers should be encouraged to set realistic expectations about retirement — and auto-escalation can help them achieve their retirement savings goals.
"The infrastructure that exists today represents a combination of ideas from the retirement industry, private individuals, advocates, and public policymakers. It is a joint effort like this — in a coordinated, full-court press — that is needed to take America's retirement savings system to the next level," Reynolds concludes.
Read 7 Things Your Clients Need to Know About Retirement: Harold Evensky at ThinkAdvisor.


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Commodity investors pulled over $4 billion out of the sector recently, according to several reports.
The main selling points of the sector—modest returns, diversification and inflation protection—didn't seem to be ring true. Instead, the indexes were delivering smaller, more volatile returns.
The S&P GSCI (formerly the Goldman Sachs Commodity Index), for instance, lost about 33% over the five-year period ending '12, when inflation had totaled roughly 6%.
Given that background, it seems like a lousy time to promote a commodities fund. Direxion Funds, though, disagrees.
Ed Egilinsky (left), head of alternatives for the New York-based organization, argues that the Direxion Indexed Commodity Strategy Fund (DXCTX)) can deliver commodities' historical portfolio benefits.
This is true, at least in part, because it's the only fund on the U.S. market that aims to match the performance of the Auspice Broad Commodity ER Index, before fees and expenses, Eglinsky says.
Many commodity funds take both long- and short-positions. A key feature of the Auspice index, however, is that it uses a long-flat strategy.
The goal of this approach is to take advantage of commodity prices when they rise, while also preserving capital by going flat (i.e., to cash) when prices fall.
According to Direxion, the investment strategy of the fund includes:
- A quantitative, rules-based index approach to commodity investing.
- Exposure to 12 commodities that can individually be long or flat.
- The ability to make position changes intra-month based on trends.
- A review of trends over short time frames, making it most responsive in the near-term.
- Monthly rebalancing based on risk reduction in which the allocation of individual components is reduced only if volatility exceeds certain predetermined risk levels, and
- A smart contract roll-yield approach designed to select the most cost-effective futures contract.
The historical results from this approach are encouraging, Egilinsky explains.
"What we've seen over the years is that [the Auspice Index] has been able to provide commodity-like returns with about half the standard deviation and about three to four times less the decline, maximum decline, than long-only commodity indices," he said, in an interview with AdvisorOne.
"So, the worst drawdown or maximum decline if you bought at a top and sold at a bottom has been about 17% since 2000 on the Auspice Broad Commodity Index data, while most long-only commodity indices have had declines, maximum declines, of 50% or more and that includes even single commodities like gold, for example," he shared.
Even in a period when the broad commodity indexes have been sub-par performers, individual commodities can perform well, Egilinsky notes. Plus, the Fund's goal is to identify those pockets of potential profits while staying out of assets moving lower.
"There's always going to be certain commodities that are showing some upside, even in years that are not favorable for the broader commodity markets as a whole," he said.
"Look at 2008, for example," Eglinsky explains. "I believe gold and sugar were up for the year. It was a tail of two halves in 2008 where the commodities did very well in the first half of the year. Then there was that economic crisis and the financial crisis, and commodities finished down rather severely as a whole."
But there are always some commodities that are going to show some positive performance in any given year, he points out.
To have a more dynamic approach is going to hopefully be able for us to capture some of that return stream," he adds, "even when it's not favorable necessarily for the broader commodity environment."
Direxion also believes it can mitigate some of the well-known problems with managing portfolios of futures contracts.
Many commodity funds, especially retail commodity funds, don't take into account the impact of rolling positions, i.e., contango and backwardation, says Egilinsky. However, Direxion's approach takes that into account, when it's looking to roll investors into the most cost-efficient futures contract:
"There could be times where you're rolling positions and it's [going to have] a negative impact on the performance," he explained. "So, you want to have a strategy like ours, for example, that takes that into account."

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