May 24, 2011 / 1:19 PM / 7 years ago

Putnam CEO: Protect retirement savings tax breaks

* Reynolds calls for keeping 401(k), IRA tax incentives

* Deficit-cutters eye retirement plans for revenue

By Ross Kerber

BOSTON, May 24 (Reuters) - U.S. deficit-reduction efforts should not include cutting incentives for workers to stash away money in retirement-savings accounts, Putnam Investments Chief Executive Officer Robert Reynolds said on Tuesday.

Reynolds’ remarks come as several groups in Washington have mentioned reducing tax advantages for vehicles like 401(k)s and Individual Retirement Accounts as a way to cut the federal deficit. Some Democrats have mentioned reducing the tax breaks as unnecessary perks to wealthier workers, but the issue has not been a top-line topic in recent months.

Speaking at a breakfast meeting of the Greater Boston Chamber of Commerce, Reynolds said such steps would ignore the long-term benefits these accounts have for individual workers, particularly as private pension and Social Security cuts loom.

“Retirement savings is a vital complement to fiscal sanity and key to sustaining long-term economic growth for this country,” Reynolds said.

Reynolds acknowledged that some reforms might not have a major impact on all workers. For instance, the National Commission on Fiscal Responsibility and Reform has suggested capping tax breaks on retirement contributions to the first $20,000 a year they save.

But such steps could spiral into more serious cuts, Reynolds said. “Once savings tax deferrals are on the table, they are in play.”

As head of the Boston asset manager, Reynolds has become one of the more outspoken policy advocates in the fund industry, which relies heavily on retirement savings for its revenue and profit. Reynolds mentioned the industry’s stake in his remarks, noting that Boston-area companies manage about 20 percent of all U.S. fund assets.

“The good news for New England is that this state has an unusually large role in retirement finance,” supporting tens of thousands of jobs, he said.

Putnam is part of Canada’s Power Financial Corp (PWF.TO). (Reporting by Ross Kerber; Editing by Lisa Von Ahn)

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