Asset management division’s 14th annual guide to retirement highlights challenges for today’s retirees.
Retirees and those nearing retirement are increasingly focused on a core set of financial concerns: generating reliable income, coping with unpredictable spending and maintaining adequate emergency savings.
JPMorgan Asset Management’s 14th edition of its annual Guide to Retirement, examines evolving retirement trends through anonymized household data and proprietary research, including spending patterns, Social Security preparedness, the potential role of alternative investments in 401(k) plans and growing interest in guaranteed income strategies.
“This year’s findings show that the top concerns for retirees and those preparing for retirement are generating sufficient income, managing spending volatility and maintaining emergency savings,” said Michael Conrath, chief retirement strategist. “As people live longer and the retirement landscape becomes more unpredictable, advisors need practical tools to help clients and participants understand and navigate retirement challenges.”
One of the report’s recurring themes is the gap between what workers expect and what actually happens when they retire. While many Americans plan to retire around age 65, the median retirement age is closer to 62, often because of health issues, layoffs or family caregiving needs.
At the same time, longer life expectancies are increasing the planning horizon. Individuals retiring at 65 may need to prepare for retirement periods lasting as long as 35 years, particularly if they are in good health.
That extended time frame makes income planning and portfolio growth critical, especially as retirees face inflation, market volatility and rising health care costs.
The report emphasizes that incremental changes to savings behavior can significantly improve retirement readiness. For example, increasing contributions by just one percentage point over a career can add roughly $84,000 in additional retirement savings, an amount the firm estimates could cover nearly nine years of Medicare-related expenses.
Workplace retirement plans also play a major role in helping workers build savings.
According to the research, 62% of employees with access to a retirement plan have saved at least $100,000, compared with only 5% of workers without such access. The report notes that plan features such as auto-enrollment and automatic contribution increases can further boost participation and savings rates, particularly among small business employees.
Social Security decisions carry lasting consequences
Social Security remains one of the most important — and frequently misunderstood — aspects of retirement planning, the report says.
“We continue to see that the timing of when you claim benefits can have a lasting impact on your financial security. It’s critical for individuals to understand the trade-offs, debunk common myths, and consider their personal circumstances so they can make the most informed choices for their retirement,” said Sharon Carson, retirement strategist.
Workers who claim benefits early can significantly reduce their lifetime income. Claiming Social Security at age 62 results in a permanent reduction to roughly 70% of the full retirement benefit, while delaying benefits until age 70 increases monthly payments by about 24% compared with claiming at full retirement age.
Another major takeaway from the guide is the unpredictable nature of retirement spending.
According to the firm’s analysis, six in ten new retirees experience significant spending swings during their first three years of retirement, highlighting the importance of maintaining flexibility and liquidity.
The research also found that households with more guaranteed income — such as Social Security, pensions or annuities — tend to spend more comfortably in retirement. In some cases, those households spend up to 44% more annually, suggesting that dependable income sources can give retirees greater confidence to use their savings.
The guide also stresses the value of tax diversification. Maintaining assets across traditional tax-deferred accounts and tax-free Roth accounts can help retirees manage their tax bills, reduce the risk of higher Medicare premiums and create more flexibility in how income is drawn during retirement.
Ultimately, the firm’s strategists say retirement planning is becoming more complex as Americans live longer and face more uncertainty in markets and employment. The report highlights the growing need to help clients build flexible retirement income strategies capable of navigating spending shocks, tax considerations and the realities of longer retirements.
