Clarity, simplicity and a bias towards positive action is the mandate Putnam [profile] CEO Bob Reynolds has given the design crew for Putnam's Web tools for plan participants. Two years ago that mandate spurred the creation of Putnam's Retirement Income tool. Now the tool is getting a facelift to bring monthly health care costs into the picture.

Today 401(k) plan participants logging into a Putnam plan see their estimated monthly retirement income as the first screen. That screen also has sliders that let the participant play with different deferral rates, asset allocations and retirement ages. If they like what they see, they are able to change their current plan settings with one click.

Starting in the fall, those participants will also be able to see an estimate of their monthly health care spending in retirement.

The tool will enable participants to factor in their current health when using the calculator. In short, it will includes factors such as whether they have been diagnosed with type 2 diabetes or cancer.

Van Harlow, director of retirement investment solutions at Putnam, points out that in some cases these conditions will lower the savings need for participants.

While Putnam does not provide health insurance, or any solution to health care spending, Reynolds and Putnan 401(k) chief Ed Murphy believe that providing participants with a clear understanding of what they will need to spend on healthcare after they turn 65 will give them more confidence in their plan. Their theory is that more confidence will translate into more adequate savings.

Part of Putnam's approach is to create a simple-to-understand retirement number for plan participants. As part of setting that paradigm for the industry, Reynolds tapped Brightwork Partners to see how well the nation is doing as a whole. That number remains low, but improved a smidgeon in the past year.

Americans are on pace to replace 65 percent of their current income after they retire, according to Brightworks. That is up from 64 percent in 2011.

The bright spot in the Brightworks research, Murphy said, is that it shows 401(k) plans are working for those that they cover.

Those covered by a 401(k) plan are on track to replace 92 percent of their monthly income when they retire. Meanwhile, those not eligible for a plan are on track to replace just 41 percent.

Murphy said that the research also shows that advisors play a key role in creating saving. The involvement of an advisor creates a 30 percent spread on income replacement, he explained. The replacement ratio for Americans with an advisor is 89 percent compared to 59 percent for those on their own.

By far the most successful group of savers are those who set aside at least 10 percent of their income in a 401(k) plan. The 10 percent deferrers are on pace to replace 145 percent of their current income, according to Putnam's figures.

"We know as an industry that we set the default rates too low at three or four or five percent, and that has to change," said Murphy. 

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