J.P. Morgan Launches 2013 Guide to Retirement

For the third edition of the Guide to Retirement, a couple of key themes were top of mind, Katherine Roy, chief retirement strategist at J.P. Morgan Asset Management, told PLANADVISER.

The guide was created using research from the Bureau of Economic Statistics, health care costs, input from advisers, and the fears and opinions of investors themselves. “The guide is a broad piece that covers every topic an adviser might need to bring up with clients,” Roy said, “from savings, spending, investing and setting the stage overall.”

The Guide to Retirement features clear, compelling charts on the most relevant retirement planning topics to help financial advisers engage clients, explain complex topics and encourage informed decisions. It methodically addresses common misconceptions of investors—“My medical expenses will be covered”; “I’ll continue to work during retirement”; “The market is too volatile. I’m going to sit on the sidelines for a bit so I don’t lose everything.”—and provides thoughtful answers for the adviser.

Last year, Roy said, the guide introduced a table with savings checkpoints for different ages. The investor multiplies his or her closest current salary by the checkpoint shown (beginning at a low rate of 0.4 for a 30-year-old and ending with a higher factor of 16.6 for a 65-year-old) to get the amount that should already be saved.

In this year’s guide, J.P. Morgan Asset Management added an assumption of annual contributions of 5% going forward to factor in future savings. “Savings is a major driver of people’s preparedness over time,” Roy pointed out.

“A lot of times advisers are trying to get a sense of whether clients are on track,” Roy said. “Individuals at different salary levels have different levels of replacement rates for Social Security. What we heard from advisers was that it would be great to expand the grid to give even higher levels of salary.”


The chart about spending changes, Roy says, “was an a-ha! moment for us: the trend line for a 65-year-old was similar to the habits of people age 45 to 54. It really demonstrated the need for a growth component for people’s portfolios.”

For 2012 according to statistics from the Bureau of Economic Analysis, the personal savings rate for the U.S. was 3.65%—“well below average and not in the right direction” for retirement preparedness, Roy said. The figure was later restated to 6.5% because so much income was received at the end of the year in early bonuses.

Health care costs have risen so sharply that Roy said it was the impetus for a new slide in this year’s guide. Roy explained that two slides provide the aggregate view for men and women, as well as the average annual costs that someone might experience at age 65, which are then forecast in estimated annual out-of-pocket costs for the average 65-year-old retiring in 2013.

In last year’s guide, a pyramid chart was designed to help align sources of income and asset classes with an investor’s goals, with considerations such as the investor’s time horizon, risk tolerance and needs factored in. “It helps people mentally align” what they want to do, Roy explained.

The bucket strategy outlined to structure a portfolio helps transition an individual from a portfolio approach using an approach that is more time-segmented, Roy explained. In the near-term portfolio are cash and cash alternatives, as well as other short-duration holdings that are very liquid. In the intermediate and longer-term portfolio are similar holdings, diversified among equities, bonds and alternatives, but the weighting would be different for the two “buckets.”


Notable enhancements in the guide include:

  • Easy-to-understand retirement savings checkpoint grid, which enables investors to check whether they are track to meet retirement savings goals;
  • Models for structuring retirement income streams, to help advisers talk to clients about portfolio construction;
  • Expanded content on health care costs, saving trends and spending analysis; and
  • Analysis of tax considerations for Roth versus traditional individual retirement accounts  (IRAs).

Guide to Retirement can be a versatile tool for financial advisers in showing clients how demographics and data trends fit into their own personal retirement savings picture,” Roy said. “Having this broad context of visuals and graphics organized in one place makes it easy for clients to absorb concepts in a concrete way, yet still allows advisers to layer on their own planning and investment perspectives. With the new 2013 edition, we’ve incorporated feedback from hundreds of financial advisers to hone our focus on issues of most importance to their clients, particularly around individual retirement income planning where advisers are playing an increasingly critical role.”

The Guide to Retirement 2013 can be downloaded here.