Advisers Can Assist Participants With Spending Safely in Retirement

J.P. Morgan Asset Management has debuted retirement spending tools for plan sponsors and retirement plan advisers to integrate into the firm’s target-date fund series.

The enhanced tools were launched to provide participants with an annual sample spend-down amount and interactive spending calculator. The tools provide plan sponsors and advisers with additional resources to help participants that are at decumulation and those near retirement, says Andrea Lisher, managing director, head of Americas Client, for J.P. Morgan Asset Management.

“Target-date funds are a phenomenal vehicle for retirement savings; that extension forward to retirement spending is the next leg of the journey,” she says.

Dan Oldroyd, portfolio manager and the head of Target Date Strategies at J.P. Morgan Asset Management, adds that the tools were launched based on the firm’s research and surveys. Advisers and plan sponsors want to see retirement income and spending tools in plans.

The launch is a “new set of tools that are oriented much more to the spending side,” Oldroyd explains.

“[Research shows] they’re really focused now on helping people spend those assets in retirement,” he says. “The first save-to-spend target-date funds are going to enhance our target-date funds to offer—when you get to retirement age—sample withdrawal amounts that participants can access.”

Participants can use the tool to budget and plan for how much of their savings to spend. 

“A participant each year will get a sample withdrawal amount that takes into consideration how markets have performed, our forward-looking projections of markets, as well as how much closer they are to age 100,” Oldroyd explains. “So each year, participants will be able to take a look at that number and then, interacting with the tools, make the determination if that number makes sense for them and gives them flexibility around doing some scenario analysis. Is that right for me this year, and if I do something different, what might that look like in my retirement spending journey? The focus of the tool is to think through spending.”

The 2021 J.P. Morgan Defined Contribution Plan Participant Survey findings show that 70% of defined contribution plan participants are concerned about outliving their money in retirement, while 85% say that they would likely leave their balances in their plans post-retirement if there was an option to help generate monthly retirement income. Additionally, the firm’s 2021 behavioral research, “Retirement By the Numbers,” finds that retirees need to replace more than 90%—in contrast to previous industry projections at 70-80%—of their working income in retirement.

J.P Morgan used its proprietary data and research from the Chase banking side of the business to develop the tool. Data will inform the withdrawal amount projection for participants each year.

“We’re able to look at—over half of American households bank with Chase—trends in how people spend, when they need the money, [and] what levels of income replacement they will need. That informs how we think about the design and goes into some of the digital tools that we provide,” Oldroyd says.

Retirement plan advisers and plan sponsors can access the tools immediately. Plan sponsors can also choose to embed the tool into their website. 

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