NEW YORK, Oct. 21, 2021 /PRNewswire/ -- J.P. Morgan Asset
Management today released new defined contribution research
that reveals 42 percent of participants are leaving balances in
their defined contribution (DC) account in the three years
following retirement, up significantly from 28 percent in 2018 and
double the percentage in 2009 (20 percent).
At the same time, retirees are spending at higher than expected
levels in the early years of retirement, and should plan on needing
to replace more than 90 percent of their working income at
retirement, a significant increase from the widely accepted 70-80
percent standard. This number gradually decreases once in
retirement to 70 percent at age 85.
The first Retirement by the Numbers report combines
the firm's popular Ready! Fire! Aim? research with insights into
household spending patterns to provide a uniquely comprehensive
view of how individuals are using their DC plans as a savings
vehicle and how they are also spending as they move through
retirement.
Findings from the report also indicate that most people are
still not contributing enough to reach safe funding levels, with
average starting contribution rates beginning at 5 percent and
never reaching 10 percent before retirement.
"We can see from the first Retirement by the Numbers
report that retirees need much more in savings to accommodate
higher than expected spending needs in retirement,"
said Katherine Roy, Chief Retirement Strategist, J.P. Morgan
Asset Management. "In light of these findings, it's critical that
plan sponsors consider incorporating features such as automatic
contribution and escalation to increase lagging contribution rates.
As more participants keep assets in plans post-retirement, tools to
help participants spend down in retirement will prove increasingly
valuable to achieving strong retirement outcomes."
Based on an understanding of the saving and spending patterns of
plan participants, J.P. Morgan Asset Management plans to evolve the
glide path across its SmartRetirement suite of target date funds,
increasing equity allocations while maintaining broad
diversification and de-risking in the critical years leading up to
retirement.
"In light of our insights into the spending and savings patterns
of plan participants, we have adjusted the SmartRetirement glide
path to meet a higher accumulation target and enable more
participants to reach a minimum level of adequate replacement
income," said Dan Oldroyd, Head of
Target Date Strategies, J.P. Morgan Asset Management.
"Additionally, with data telling us that more participants are
staying in their plan after retiring, we have introduced a dynamic
retirement income strategy into the glide path to help set an
optimized annual spend down amount that changes each year, starting
at the point of retirement."
The Retirement by the Numbers research draws upon actual
saving and withdrawal patterns from approximately 4,500 DC plans
with more than 1.4 million participants1. Retiree
spending data comes from more than five million de-identified
JPMorgan Chase Bank, N.A. (Chase) households.
Findings from the Retirement by the Numbers
report have several implications for DC plan and target date
fund glide path design:
- Getting more participants to save more: Plans can
help participants help themselves through the broader use of
automatic contribution and escalation programs at much higher
starting levels and increase rates than typically used today. Our
biennial participant survey published earlier this year revealed
that participants largely think they should be saving more than
they are, and almost all of those automatically enrolled with their
contributions automatically increased, and reported being satisfied
with the actions.
- Updates to the SmartRetirement glide path: To
help address the significantly higher accumulation target for the
average participant and our low long-term market expectations, we
will increase equity allocations across the glide path2,
while maintaining our emphasis on increasing risk/reward efficiency
through broad diversification and a relatively rapid reduction in
equity exposure in the critical years leading up to
retirement.
- Including an efficient retirement income option:
Our glide path enhancements include a proprietary methodology that
can help enhance the potential efficiency for spending down assets
through retirement, based on actual spending behaviors, while
minimizing longevity risk. The firm's recent research, drawing on
data from the Employee Benefit Research Institute (EBRI), showed
that participants are heavily reliant on required minimum
distributions (RMDs) for withdrawal guidance. J.P. Morgan Asset
Management has developed an interactive experience to help
participants decide how much to withdraw each year based on sample
withdrawal amounts estimated as a percentage of participants'
account balances that may be safely withdrawn each year, while
allowing for redemption in future years.
"We remain committed to diving deeper into the numbers
surrounding retirement funding and spending behavior to both help
support our clients in their retirement decision making and to
inform the design of our retirement solutions," said Kelly Hahn, Defined Contribution Strategist,
J.P. Morgan Asset Management.
About J.P. Morgan Asset Management
J.P. Morgan Asset Management, with assets under management of
USD 2.7 trillion (as of 30 September 2021), is a global leader in
investment management. J.P. Morgan Asset Management's clients
include institutions, retail investors and high net worth
individuals in every major market throughout the world. J.P. Morgan
Asset Management offers global investment management in equities,
fixed income, real estate, hedge funds, private equity and
liquidity. For more information:
www.jpmorganassetmanagement.com.
JPMorgan Chase & Co. (NYSE: JPM) is a leading financial
services firm based in the United States
of America ("U.S."), with operations worldwide. JPMorgan
Chase had $3.8 trillion in assets and
$290.0 billion in stockholders'
equity as of September 30, 2021. The
Firm is a leader in investment banking, financial services for
consumers and small businesses, commercial banking, financial
transaction processing and asset management. Under the J.P. Morgan
and Chase brands, the Firm serves millions of customers in the
U.S., and many of the world's most prominent corporate,
institutional and government clients globally. Information about
JPMorgan Chase & Co. is available at www.jpmorganchase.com.
J.P. Morgan Asset Management is the marketing name for the asset
management businesses of JPMorgan Chase & Co., and its
affiliates worldwide.
DATA PRIVACY: We have a number of security protocols in place
which are designed to ensure all customer data are kept
confidential and secure. We use reasonable physical, electronic,
and procedural safeguards that are designed to comply with federal
standards to protect and limit access to personal information.
There are several key controls and policies in place which are
designed to ensure customer data are safe, secure and anonymous:
(1) Before J.P. Morgan Asset Management (JPMAM) receives the data,
all unique identifiable information, including names, account
numbers, addresses, dates of birth and Social Security numbers, is
removed. (2) JPMAM has put privacy protocols for its researchers in
place. Researchers are obligated to use the data solely for
approved research and are obligated not to re-identify any
individual represented in the data. (3) JPMAM does not allow the
publication of any information about an individual or entity. Any
data point included in any publication based on customer data may
only reflect aggregate information. (4) The data are stored on a
secure server and can be accessed only under strict security
procedures. Researchers are not permitted to export the data
outside of J.P. Morgan Chase's (JPMC) systems. The system complies
with all JPMC Information Technology Risk Management requirements
for the monitoring and security of data. (5) JPMAM provides
valuable insights to policymakers, businesses and financial
advisors, but these insights cannot come at the expense of consumer
privacy. We take every precaution to ensure the confidence and
security of our account holders' private information.
© 2021 JPMorgan Chase & Co. All rights reserved.
1 Source: Participant data from MassMutual Financial
Group
2 The effective date of the new glide path
allocation is on or about March
18th, 2022.
View original content to download
multimedia:https://www.prnewswire.com/news-releases/jp-morgan-research-reveals-more-retirees-keeping-assets-in-dc-plans-post-retirement-spending-significantly-more-than-expected-in-early-years-of-retirement-301405663.html
SOURCE J.P. Morgan Asset Management