J.P. Morgan Asset Management today released the 11th edition of its annual Guide to Retirement, analyzing the most significant issues impacting retirement to help advisors and their clients, and DC plan participants make informed planning decisions and take positive actions to achieve a comfortable retirement.
“Retirement investors have experienced unprecedented volatility in the market throughout the last year, and face uncertainty for the year ahead. However, we feel optimistic for the future of retirement security as legislators and policy makers are emphasizing the need for broader access to retirement plans and an increase in savings rates.” said Michael Conrath, Chief Retirement Strategist, J.P. Morgan Asset Management. “Our 2023 Guide to Retirement has been designed to help advisors navigate the evolving economic environment, take advantage of recent legislative changes, and provide long-term investing strategies to drive stronger retirement outcomes for clients.”
Below is an overview of five key retirement themes featured in the 2023 Guide to Retirement:
1. Opportunities presented by SECURE 2.0 Act (“Act”)
The Act will encourage small businesses to create retirement plans through increased tax credits. This provision specifically addresses nearly 50% of those private sector employees working for small businesses who have no employer-sponsored plans and those who have employer-sponsored plans are more likely to save towards retirement by two fold.
2. Importance of building an emergency reserve
Spending and income shocks are prevalent for workers and retirees alike. Retirees encounter more shocks in larger amounts than workers likely due to unpredictable healthcare costs. If people don’t have an emergency reserve, they often tap their retirement portfolios prematurely and jeopardize their retirement success. We find from Chase consumer data that workers need about 2-3 months of pay in an emergency reserve and 3-6 months of pay for retirees.
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