Talking through the newly published 2018 Guide to Retirement with a small group of financial services trade journalists, Anne Lester, head of retirement solutions for J.P. Morgan Asset Management, highlighted the deep analytical work her team has done regarding the optimal shape of target-date fund (TDF) glide paths during investors’ retirement years.

She also took time to talk about the broad demographic research her team conducts to better inform TDF product construction. In short, the firm sees clear evidence that the U.S. workforce is rapidly aging, and that this fact should inform providers’ and plan sponsors’ decisions about how they present retirement investing opportunities to individual participants.

“Americans have to plan better for longevity, it’s really clear,” Lester said. “Average life expectancy continues to increase, and the numbers you hear about are the mid-point, not an end-point. As a participant nearing retirement age, you may need to plan on the probability of living perhaps 30 or more years in retirement.”

Such a long potential retirement essentially mandates the need to invest a sizable portion of the defined contribution (DC) plan portfolio in growth assets. Otherwise, and for those with a more modest nest egg in particular, it is unlikely that the existing level of savings will allow retirees to maintain their purchasing power in the face of inflation, raising health care costs, etc.

The 2018 Guide to Retirement lays out some thought-provoking figures in this context. Take a couple that is healthy and is retiring today at age 65. The probability of at least one member of this couple living to age 75 is 97%. The probability of one member living to 80 is still a very strong 90%, while the probability of one reaching 90 is 50%.

As Lester pointed out, older Americans are working later—a trend that is likely to continue and increase as the Baby Boomer population ages. In 1996, 22% of Americans between ages 65 and 69 remained a part of the work force. Today that figure is 32%, and it is projected to grow to nearly 40% within 10 years.

“Asked about the major reasons they want to work beyond the traditional retirement age, Americans point to both wants and needs,” Lester explained. “The most common response is that people want to stay active and involved, or that they simply enjoy working. Some say they will try a new career, while about a fifth say they expect to need to work beyond this age to make ends meet.”

Lester warned that, while more Americans are working later in life, many individuals find themselves forced to retire either at the traditional age or even earlier in some cases.

“This possibility also has to be planned for,” Lester urged. “It is very common to find yourself having to leave the work force earlier that you expected because of chronic health conditions that can emerge later in life. We have all seen this play out in our personal lives. Very few people have complete control over when they retire, so it makes a lot of sense to have a flexible back-up plan in place. You may have to draw income earlier and make your portfolio last longer than you anticipate.”

Lester went on to talk at length about the crucial importance of planning effectively for when and how to draw Social Security income, calling this one of the most critical point-in-time financial decisions an individual will face in their lifetime. As noted in the Guide to Retirement, deciding when to claim benefits will have a dramatic and permanent impact on the benefit you receive. Claiming before full retirement age can significantly reduce the monthly benefit paid, while delaying increases it.

“In 2017, full retirement age began transitioning from 66 to 67 by adding two months each year for six years,” Lester noted. “This makes claiming early result in an even greater benefits reduction.”

Lester went on to direct readers to examine Page 11 in the Guide, which lays out an interesting comparison of the optimal claim age based on an individual’s expected rate of investment returns mapped against expected longevity. It’s quite a complicated bit of math going into the graph, Lester agreed, but the result is compelling and shows in clear terms how, the lower an individual’s expected long-term investment return and the longer their life expectancy—the more it pays to wait to take the Social Security benefit.