Longevity, household spending, and (of course) inflation are just a few of the issues retirees and near-retirees face in 2022, and J.P. Morgan Asset Management is out with its annual Guide to Retirement, analyzing those that are the most significant to help investors make informed decisions and take positive actions to achieve a comfortable retirement.
“Retirement investors and advisors are grappling with a range of challenging issues, from an evolving inflation picture to an increase in forecasted spending needs in retirement, and ongoing questions around Social Security,” Katherine Roy, Chief Retirement Strategist with J.P. Morgan Asset Management said in a statement. “The 2022 Guide to Retirement has been designed to help advisors tackle the most pressing retirement challenges and provide strategies to help drive stronger retirement outcomes for clients.”
Here are the five:
- Plan for an even longer life (and how to do it well)
- Average life expectancy continues to increase, and investors need to plan on the probability of living much longer – perhaps 35 years in retirement – particularly for non-smokers who are in excellent health.
- Aging successfully is a key priority and individuals should focus on the ‘PUSHES’ in retirement.
- Investing a portion of your portfolio for growth is important to maintain your purchasing power over time, particularly in an inflationary environment
- Most Americans are spending more…then less…then more
- Income replacement needs have risen across the income spectrum and now ranges from 72-98%.
- For households with estimated investable wealth of $1m – $3m, average spending is highest around age 50 – 55, declines until about age 80 when it begins to rise again.
- Those at older ages tend to spend less on all categories but health care and charitable contributions.
- Retirement savings “checkpoints” should be assessed from an early age
- Too few Americans have calculated what it will take to be able to retire at their current lifestyle.
- Retirement checkpoint calculations can help investors to quickly gauge whether they are “on track” to afford their current lifestyle for 35 years in retirement based on their current age and annual household income.
- Keep inflation in perspective when planning for retirement
- When planning for retirement, it’s critical to take a long-term view, including planning for health care costs separately.
- For example, older households purchase more health care, but less transportation than households age 35-44, making them less vulnerable to the volatile energy category than younger households. Conversely, health care costs grew about half as fast as the long-term average in 2021.
- Stable vs. variable is the new “discretionary vs. non-discretionary”
- Aligning retirement income and assets based on how they will be used to support an individual’s retirement lifestyle is one way to ensure a higher degree of confidence through retirement.
- Known as “guarantee the floor,” our analysis shows how stable spending can be aligned with relatively safe or guaranteed funding sources, while variable spending can be covered by retirement income solutions and may require a cash reserve to be available through the year.
TO VIEW THE FULL 2022 GUIDE TO RETIREMENT, CLICK HERE.
With more than 20 years serving financial markets, John Sullivan is the former editor-in-chief of Investment Advisor magazine and retirement editor of ThinkAdvisor.com. Sullivan is also the former editor of Boomer Market Advisor and Bank Advisor magazines, and has a background in the insurance and investment industries in addition to his journalism roots.
