January 21, 2000 

New Financial Products Offer Market Protection to Retirees 
 

A common objection to Social Security reform featuring personal retirement accounts is that a large market downturn during retirement could leave a worker with a sharply reduced income and wealth. But new products offered by the financial services industry could protect workers and their heirs from that threat. 

The Wall Street Journal reported Tuesday that Putnam Investments, Inc. will soon begin offering insurance products to protect mutual fund holders against protracted market downturns. For a cost of 30 to 50 basis points (0.3 to 0.5 percent) on top of their ordinary management fee, investors would receive a guarantee that their portfolio's value would rise by at least five percent per year. In addition, the policy protects the retiree's heirs. If the fund holder died before the fund recovered its value from a market drop, the insurance plan would pay his heirs the difference between the portfolio's value at the time of death and its highest value at designated points in the past, up to a maximum of $2 million. 

Insurance like this would let retirees and older workers could keep their assets in higher yielding stock mutual funds, rather than having to shift their assets into safe, but low yielding bonds. 
 
 

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