J.P. Morgan Asset Management has released the 12th edition of its annual Guide to Retirement, a crucial resource for financial advisors and individuals planning for their future. This 2024 guide delves into the most pressing issues impacting retirement planning today, offering data-driven insights to help navigate complexities around taxes, Social Security, healthcare costs, and unforeseen financial shocks. By leveraging anonymized household data and proprietary research, the guide provides a realistic view of spending and saving patterns, empowering individuals to make informed decisions and enhance their retirement security.
Michael Conrath, Chief Retirement Strategist at J.P. Morgan Asset Management, emphasizes the ongoing challenges in retirement saving, particularly with competing financial goals and unexpected expenses. However, he expresses optimism due to increased focus from plan sponsors and legislators on expanding access to retirement savings. The 2024 J.P. Morgan Guide to Retirement is designed to equip advisors with the strategies needed to guide clients towards achieving their long-term retirement objectives effectively.
Steve Rubino, Head of Retirement at J.P. Morgan Asset Management, highlights the guide’s reputation for transforming complex retirement issues into clear, actionable insights. He underscores J.P. Morgan’s commitment to utilizing its deep understanding of markets and the U.S. retirement system to support millions of retirement savers nationwide.
The 2024 Guide to Retirement pinpoints four key themes critical to retirement planning:
Preparing for Unexpected Spending Shocks
A significant threat to retirement readiness is the prevalence of unexpected spending shocks. These shocks are frequently the reason for 401(k) loans and withdrawals, driven by a lack of emergency savings. Alarmingly, nine out of ten households experience spending spikes that exceed their income. Compounding this issue, one in three households lacks the immediate resources to cover these spikes with their income and readily available cash. This financial vulnerability often leads to increased credit card debt, borrowing from retirement savings via 401(k) loans, or reducing crucial 401(k) contribution amounts, all of which can significantly derail long-term retirement plans.
SECURE 2.0: Building a Strong Financial Foundation
The SECURE 2.0 Act continues its phased rollout, introducing provisions aimed at strengthening individuals’ financial stability. A key feature is the introduction of emergency savings accounts within Defined Contribution (DC) plans. These accounts are specifically designed to help participants build a safety net for unexpected expenses, reducing the need to tap into retirement funds prematurely. Furthermore, SECURE 2.0 addresses the burden of student loan debt by enabling employer matching contributions to retirement plans based on employees’ student loan payments. This innovative approach allows individuals to simultaneously tackle student debt and build retirement savings, fostering a more secure financial future.
Keeping in Mind Tax Implications for Retirement Savings
Strategic tax planning is an essential component of effective retirement saving. The J.P. Morgan guide emphasizes the importance of utilizing various tax-advantaged savings accounts. Diversifying retirement income sources across different tax categories – tax-deferred, tax-free, and taxable – offers considerable advantages. With potential tax rate increases looming after the sunset of the Tax Cuts and Jobs Act in 2025, understanding future tax liabilities is more critical than ever. Maintaining a mix of account types provides greater flexibility to manage taxes effectively throughout retirement, optimizing after-tax income based on evolving circumstances.
Taking a Long-Term View on Markets Pays Off
Market volatility is a constant concern for retirement savers, but the guide stresses the benefits of a long-term investment perspective. Illustrating this point, the research highlights that missing just the 10 best market days over the past two decades could slash retirement account values by a staggering 50%. This dramatic impact underscores the critical importance of staying invested and adhering to a diversified, long-term investment strategy. Historically, some of the market’s strongest recovery days occur in close proximity to the weakest, making timing the market not only difficult but potentially detrimental to long-term growth. A consistent, long-term approach, as advocated in the J.P. Morgan Guide to Retirement, is more likely to yield favorable retirement outcomes.
J.P. Morgan Asset Management provides extensive resources to support financial advisors and plan participants. Beyond the Guide to Retirement, they offer industry-leading insights through publications like the Guide to the Markets and Long-Term Capital Market Assumptions. They also collaborate with the Employee Benefit Research Institute (EBRI) on spending and saving research. Furthermore, J.P. Morgan offers a suite of digital tools and resources, including Target Date Compass®, to aid in target date fund evaluation and retirement planning.
For a comprehensive understanding of these critical retirement issues and strategies, the full 2024 J.P. Morgan Guide to Retirement is available here.
About J.P. Morgan Asset Management
J.P. Morgan Asset Management, a global leader in investment management, oversees $3.1 trillion in assets under management as of December 31, 2023. Serving institutions, retail investors, and high-net-worth individuals across major global markets, the firm offers a broad spectrum of investment capabilities, including equities, fixed income, real estate, hedge funds, private equity, and liquidity management. For further details, please visit www.jpmorganassetmanagement.com. J.P. Morgan Asset Management is the marketing name for the asset management businesses of JPMorgan Chase & Co. and its worldwide affiliates.
JPMorgan Chase & Co. (NYSE: JPM), a leading global financial services firm headquartered in the United States, had assets of $3.9 trillion and stockholders’ equity of $328 billion as of December 31, 2023. A leader in investment banking, consumer and small business financial services, commercial banking, financial transaction processing, and asset management, JPMorgan Chase serves millions of U.S. customers and prominent corporate, institutional, and government clients globally under the J.P. Morgan and Chase brands. Additional information is available at www.jpmorganchase.com.
Important Information:
This communication is for informational and educational purposes only and should not be considered investment advice or a recommendation for any specific product, strategy, or plan feature. Any examples provided are hypothetical and for illustrative purposes. Investors should seek personalized advice from qualified financial, legal, and tax professionals before making any investment decisions, considering their unique circumstances.
SOURCE J.P. Morgan Asset Management
