Investing. for retirement THE IMPORTANCE OF SAVING, AND HOW TO GET STARTED

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1 Investing for retirement THE IMPORTANCE OF SAVING, AND HOW TO GET STARTED

2 Why save now? Paying for retirement is likely to be the biggest expense you ll ever face. By saving today, you can help make a difference in your future. Use this guide to better understand the basics of investing and how your plan can help you pursue your individual goals. People are living longer People today are living longer, healthier lives than they have in the past. In fact, if you retire at age 65, you may spend more than 20 years in retirement, which is a long time to go without a paycheck. Social Security may not be enough The money you receive from Social Security each year will replace only a portion of what you earned during your working years. Your savings need to make up the difference if you expect to maintain your current lifestyle in retirement. Your expenses may not go down as much as you think Although some expenses may go away in retirement you may pay off the mortgage, for example others may take their place, including health-care costs or travel. Your prime earning years are your best opportunity to save While many people envision working later in life to provide income during retirement, the fact is most people retire before age 65, often due to unexpected reasons.* By saving as much as you can during your working years, you can help maintain your current lifestyle once the paychecks stop coming. * Source: Employee Benefit Research Institute, Retirement Confidence Survey, 2006.

3 Save as much as you can during your prime earning years to help avoid an income gap after you retire. $80,000 PRIME EARNING YEARS $70,000 $60,000 Average annual expenses by household Average annual income by household Income available to save $50,000 $40,000 Annual income needed from personal savings to maintain standard of living in retirement $30,000 $20,000 $10,000 Average annual income from Social Security Age Under and over Source: U.S. Department of Labor, Consumer Expenditure Survey Report, 2005.

4 Why save in the plan? Your plan is a great way to save for retirement. It offers tax benefits and convenience you can t find anywhere else. Your contributions are automatic You decide how much of your pay you want to invest, and the money is automatically deducted from each paycheck. Automatic payroll deductions mean no dates to remember and no checks to write. You pay less in taxes now The plan allows you to save money before it is taxed, and the amount you save reduces your current taxable income dollar for dollar. As a result, you ll pay less in taxes each pay period and you may have more money to invest. You won t pay taxes on your savings until you take the money out at retirement, at which point you may be in a lower tax bracket. Your savings compound tax deferred As your account balance accumulates, your money can earn an investment return on both the amount you invested and the earnings an effect known as compounding. Compounding is enhanced in the plan because taxes do not eat away at your account balance before you withdraw the money. And the more time you give compounding to work, the harder your money can work. If you start saving later, it may be difficult to catch up. You can take your savings with you Your contributions to the plan are always yours to keep (subject to any earnings or losses) should you leave your job. The ability to transfer your savings from one employer s qualified plan to another means you can build your retirement savings throughout your career.

5 Save in your plan today, because waiting could cost you in the long run. Investor A Investor B $523,651 Account value* Starts now and contributes $150 a month for 40 years Waits 10 years then tries to catch up by contributing $200 a month for 30 years $72,000 Total contribution $72,000 Total contribution $298,072 Account value* Today 10 years 20 years 30 years 40 years * This illustration is intended solely to demonstrate the comparative effect of compounding on current versus delayed investments. It assumes the investor makes contributions at the end of each month and that the investment earns a hypothetical 8% nominal rate of return compounded monthly (the effective return is 8.30%). It does not reflect the return of any investment in your plan, which will fluctuate. Regular investing does not ensure a profit or protect against loss in declining markets. Examples do not reflect taxes due upon withdrawal. Withdrawals are subject to income tax, and those made before age 59 may be subject to an additional 10% tax.

6 The basics of investing Stocks and bonds are the building blocks of most mutual fund investments, and both can play valuable roles in helping you pursue your retirement goals. Stocks offer the potential to build wealth Stocks represent part ownership of a company, including its earnings and assets. As a company grows and earns greater profits, its stock can increase in value, sometimes dramatically over the long term. Historically, stocks have been the best way to grow the value of an investment over the long term and to help protect savings from the effects of inflation. However, they have also been more likely to lose money in any given year. Bonds offer the potential for greater stability Bonds represent loans to companies or governments that are repaid to investors over time with interest. Although a bond s price can fluctuate with changes in the financial markets, particularly in response to changes in interest rates, bond prices historically have fluctuated less than stocks. The lower volatility means that bonds are less likely to grow fast enough to meet your long-term savings goals. Mutual funds offer a convenient way to invest in stocks and bonds A mutual fund pools your money with that of other investors to buy a variety of stocks, bonds, or both, in a single, professionally managed portfolio. Since there are different types of stocks and bonds, mutual funds are managed in different styles, including growth, blend, value, income, and capital preservation, based on how they invest.

7 Keep in mind that stocks have provided higher average returns than bonds over time, but with more dramatic ups and downs along the way. Average annualized returns, along with best and worst calendar year returns (12/31/86 12/31/06) STOCKS BONDS Highest return 41.66% 36.80% 37.03% 18.47% Average return 10.10% 11.71% 12.84% 7.35% 8.99% 4.89% 1.15% 0% -2.92% % Lowest return % % GROWTH BLEND VALUE INCOME CAPITAL PRESERVATION Growth funds seek to maximize the value of your savings over time by investing in the stocks of companies that have a strong potential for providing above-average earnings growth. Blend funds seek to increase the value of your savings over time by investing in a combination of stocks of companies that have the potential for strong earnings growth and stocks of companies that are priced below their expected long-term worth. Value funds seek to increase the value of your savings over time by investing in undervalued, or attractively priced, stocks of well-established companies. Income funds seek to provide a steady stream of income, which is reinvested in your account, and in some cases a small amount of growth, by investing in bonds issued by governments and corporations. Capital preservation funds seek to offer price stability and a steady stream of income, which is reinvested in your account, by investing in short-term bonds or contracts issued by creditworthy companies, financial institutions, and government entities. Growth, blend, value, income, and capital preservation are represented by the Russell 3000 Growth Index, Russell 3000 Index, Russell 3000 Value Index, Lehman Aggregate Bond Index, and Merrill Lynch 91-day Treasury Bill Index, respectively. Investors cannot invest directly in these unmanaged indexes. Past performance does not guarantee future results or the results of any fund in your plan, which will fluctuate with market conditions. Regular investing does not ensure a profit or protect against loss in declining markets. Withdrawals are subject to income tax, and those made before age 59 may be subject to an additional 10% tax.

8 The right mix To achieve your financial goals, you ll need a combination of investments that makes sense for those goals and a plan for maintaining this mix over the long term. Diversify to smooth out the market s ups and downs At any given time, economic and market conditions will favor one type of investment over others. Since it is impossible to predict which will lead the market (and which will lag), by choosing a variety of investments a practice called diversification you can increase your chances of owning the best performers while reducing your exposure to poor performers. Of course, diversification does not guarantee a profit, and you can still lose money in a diversified portfolio. Rebalance your portfolio to keep it in line with your goals Over time, gains in some types of investments and losses in others could cause your portfolio to shift from your intended strategy. Rebalancing your portfolio selling some of your investments that have grown and investing more in the areas that have fallen behind can help ensure you are taking on the level of investment risk that you intend, although it can t guarantee you won t lose money. Stick to your plan through market cycles It is natural when your investments are going up to want to buy more of the best performers or when your investments are going down to want to sell the worst performers. However, history has shown that maximizing your contributions in a diversified portfolio that is rebalanced through up and down markets is a more effective way to try to manage risk over time.

9 Diversify across investment styles to help keep your portfolio on track in an unpredictable market. YEAR BEST PERFORMER WORST PERFORMER % -0.13% % 6.93% % 8.99% % -8.85% % 6.38% % 3.93% % 3.19% % -2.92% % 6.03% % 3.63% % 5.33% % 5.23% % -0.82% % % % % % % % 1.15% % 1.33% % 2.43% % 4.33% DIVERSIFIED PORTFOLIO 2.56% 14.75% 24.38% -0.93% 27.36% 8.77% 10.00% -0.06% 30.06% 16.50% 24.71% 19.21% 14.69% -2.17% -6.10% % 22.68% 9.36% 5.03% 12.43% A diversified portfolio can help increase your exposure to the best performers while limiting the impact of poor performers. Growth Value Income Capital preservation Blend Growth, blend, value, income, and capital preservation are measured by the Russell 3000 Growth Index, Russell 3000 Index, Russell 3000 Value Index, Lehman Aggregate Bond Index, and Merrill Lynch 91-day Treasury Bill Index, respectively. Investors cannot invest directly in these unmanaged indexes. Past performance does not guarantee future results or the results of any fund in your plan, which will fluctuate with market conditions. The hypothetical diversified portfolio is composed of 20% Russell 3000 Growth Index, 30% Russell 3000 Index, 20% Russell 3000 Value Index, 20% Lehman Aggregate Bond Index, and 10% Merrill Lynch 91-day Treasury Bill Index, and has been rebalanced annually. It does not represent an actual investment product. Results would vary for other allocations.

10 The choices in your plan Your plan offers two ways to build a diversified portfolio. You can choose a ready-mixed portfolio or you can mix your own portfolio using the plan s individual investment options. Choose a ready-mixed portfolio for one-step diversification. A ready-mixed portfolio may be right for you if you want to Make a single investment choice for your plan account Invest in a complete portfolio, diversified across a mix of stock and bond investments Have your portfolio automatically rebalanced for you, or professionally adjusted based on market conditions, on an ongoing basis Mix your own portfolio for a custom approach. The mix-your-own portfolio approach may be right for you if you want to Learn about your individual fund options Choose your own diversified combination of growth, blend, value, income and capital preservation funds to match your specific goals and risk tolerance Personally make adjustments to your portfolio risk level on an ongoing basis

11 Choose an investment approach that best matches your goals by using these guidelines. READY-MIXED PORTFOLIO GOAL: One-step diversification TYPICAL ALLOCATION: Choose the single portfolio that best matches your risk tolerance and time horizon. MIX-YOUR-OWN PORTFOLIO: SAMPLE INVESTOR PROFILES GOAL: Maximum growth Growth Conservative growth Income and inflation protection RISK TOLERANCE: High High to moderate Moderate Moderate to low TIME HORIZON: 20 years or more years 5 10 years 5 years or less TYPICAL ALLOCATION: 30% Growth 30% Blend 20% Growth 30% Blend 15% Growth 20% Blend 10% Growth 10% Blend 30% Value 20% Value 15% Value 10% Value 5% Income 20% Income 35% Income 50% Income 5% Capital preservation 10% Capital preservation 15% Capital preservation 20% Capital preservation The sample portfolios take into consideration the investment time horizons shown, historical inflation rates, and risk and return relationships of the asset classes shown. You should not consider this investment advice. No other assumptions have been made. In applying the sample portfolios to your individual situation, consider your assets, income, and other investments, e.g., the equity in your home, other retirement plan and IRA assets, and your savings, in addition to your plan account. You may wish to consult a financial representative to review your financial situation. Call your plan s toll-free number if you have any questions. Need help or more info? Ready to enroll? Log on to or call Putnam at k.

12 Need help or more info? Ready to enroll? Log on to or call Putnam at k. What makes Putnam different? A time-honored tradition in money management Since 1937, our values have been rooted in a profound sense of responsibility for the money entrusted to us. A prudent approach to investing We use a research-driven team approach to seek consistent, dependable, superior investment results over time, although there is no guarantee a fund will meet its objectives. Funds for every investment goal We offer a broad range of mutual funds and other financial products so investors and their financial representatives can build diversified portfolios. A commitment to doing what s right for investors We have below-average expenses and stringent investor protections, and provide a wealth of information about the Putnam funds. Investors should carefully consider the investment objectives, risks, charges, and expenses of a fund before investing. For a prospectus or an offering statement containing this and other information about any fund, please call your plan s toll-free number. Read the prospectus or offering statement carefully before making any investment decisions. Industry-leading service We help investors, along with their financial representatives, make informed investment decisions with confidence. Investments in mutual funds are not guaranteed or insured and will fluctuate in value. While every effort has been made to ensure the accuracy of the information in this material, in the case of a discrepancy, the official plan document will govern. Putnam, LLC, also known as Putnam Investments, is the holding company for affiliated entities that provide services to employers on behalf of their employee benefit plans, including Putnam Retail Management. Putnam is affiliated with Mercer HR Services, LLC and Mercer Trust Company, which provide recordkeeping, administration, and directed trustee and custodian services to employers on behalf of their employee benefit plans. Putnam Corporate Plans and Services One Post Office Square Boston, Massachusetts Putnam Retail Management ID /07