- Doug Oosterhart, CFP®
J.P. Morgan's Guide to Retirement Updated for 2023
Earlier this year, J.P. Morgan Asset Management released its annually updated Guide to Retirement. In this 52-slide/page guide, readers will find an abundance of information related to all things retirement.
Decision tree for claiming Social Security
Retirement savings checkpoints
The benefits of saving and investing early
Evaluating whether a Roth IRA makes sense
How retirement spending plays out in reality
The 4% rule
Medicare (when to sign up)
Long-term care planning
Impact of trying to time the market
Structuring a portfolio to match one's goals
IRA and 401(k) maximum contributions
2023 tax rates
and much more!
Some of my favorite slides are:
Retirement Savings Checkpoints (pages 16-17)
These pages show a good frame of reference in terms of what someone should have saved for retirement based on their current age and current income. Interestingly, they use a 60% equity and 40% bond portfolio for all ages. My rough calculations on estimated returns for their calculations are somewhere between 5-6% annually. Below is a photo of the slide I'm referencing.
The 4% rule: projected outcomes vs. historical experience (page 32)
This slide looks at how a 4% distribution rule over a 30-year retirement has played out over time. Spoiler alert: I would say mediocre at best! It's important to develop a strategy not only for the growth of one's portfolio but also for their income later. Imagine being a millionaire on paper with a high net worth, only to find out you can only take 4% of the portfolio as a distribution in retirement. A dynamic spending approach that is tailored to the individual is key!
Dollar cost ravaging: timing risk of withdrawals (page 28)
I've written and spoken about sequence of returns risk being one of the biggest risks in retirement. When a retiree withdrawals assets in down markets at the beginning of retirement, it can destroy their portfolio and entire plan. The key is to have a segment of money that is protected from stock market risk (and there are multiple ways to do that). It's important that a retiree solved their retirement consumption/withdrawal puzzle with a solution that is tailored to them.
Tax implications for retirement savings by account type (page 47)
A good amount of my work involves optimizing what type of accounts an investor or retiree should utilize. The current environment shifts a lot of consumers toward pre-tax accounts like Traditional IRA's and 401(k)'s touting the great current tax savings. While that may be true, pre-tax accounts have a looming tax liability upon withdrawal. And for those that don't "need" the money in retirement, they're forced to take it out via required minimum distributions (RMD's). RMD's can push retirees into higher tax brackets and cause problems later in life. All-in-all, it's important to stay diversified with what types of accounts an investor uses. As with everything in finance, there's an art and a science to all decisions.
Once again, here is a link to the full guide.