This year’s Guide leverages anonymized household data and proprietary research that showcases real-life spending and saving patterns to help prepare for unforeseen spending shocks and improve retirement outcomes.
J.P. Morgan Asset Management released the 12th edition of its annual Guide to Retirement, analyzing the most significant issues impacting retirement to help advisors and their clients, and defined contribution plan participants make informed planning decisions. This year’s Guide leverages anonymized household data and proprietary research that showcases real-life spending and saving patterns to help prepare for unforeseen spending shocks and improve retirement outcomes.
“Saving for retirement continues to be challenging for many individuals, especially when faced with multiple goals and unexpected spending shocks. However, we feel optimistic for the future of retirement security as plan sponsors and legislators emphasize the need for broader access to retirement savings,” said Michael Conrath, Chief Retirement Strategist, at J.P. Morgan Asset Management. “Our 2024 Guide to Retirement has been designed to help advisors provide long-term investing strategies to best position clients to reach their retirement goals and plan strategically for their future.”
“Our clients trust and rely on the insights in the Guide to Retirement to turn complexity into clarity for the individuals and plan sponsors they serve,” said Steve Rubino, Head of Retirement, J.P. Morgan Asset Management. “We’re honored to put our deep understanding of people, markets, and the U.S. retirement system to work for millions of retirement savers across the country.”Â
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Key Highlights from the Report:Â
- Preparing for unexpected spending shocks
Spending and income shocks continue to be leading causes for 401(k) plan loans and withdrawals due to a lack of emergency savings, and effectively decrease the level of retirement readiness. Nine in 10 households experience spending spikes greater than their income, and one in three households cannot fund spikes with their income and cash reserves. This has led to households increasing their amount of credit card debt, taking out a loan from their 401(k) plan, or decreasing the amount of contributions they are making to their 401(k) plan.
- SECURE 2.0: focusing on building a strong financial foundation
This year, we will see provisions from SECURE 2.0 continue to roll out. This includes the addition of emergency savings accounts in DC plans to help participants build a strong financial foundation, and ease the burden of student loan debt through employer match programs.
- Keeping in mind tax implications for retirement savings
Individuals should consider taking advantage of the different types of tax-advantaged savings accounts. Diversifying the sources of retirement income may prove advantageous due to differing circumstances. With tax rates scheduled to increase once the Tax Cuts and Jobs Act sunsets after 2025, investors need to consider their future tax situation. It may be beneficial to maintain a strategic mix of tax-deferred, tax-free, and taxable accounts for greater flexibility based on circumstance.
- Taking a long-term view of markets tends to pay off
Missing the 10 best days over the past two decades would have cut retirement account values by 50%. Staying invested with a diversified long-term investment strategy tends to lead to a better retirement outcome as some of the market’s best days occur very close to the worst days.
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