ABOUT OUR COLLABORATION
In 2020, we formed a research collaboration with the Employee Benefit Research Institute (EBRI). Drawing on their database of more than 23 million 401(k) and IRA accounts and JPMorgan Chase data for around 62 million households, we are able to create a holistic view of household finances. We believe real data about real behaviors can deliver the most useful insights to help further retirement outcomes.
LATEST INSIGHT
Required Minimum Distributions (RMDs) appear to be the dominant withdrawal “guidance” for retirees: 80% of retirees do not take distributions before the RMD age.
However, the RMD approach is inefficient. It does not generate income that supports retirees’ declining spending behavior in real terms and may leave a sizable account balance at age 100.
SPENDING IN TODAY'S DOLLARS ASSUMING $100,000 IN STARTING PORTFOLIO VALUE: THE RMD APPROACH VS. THE DECLINING CONSUMPTION APPROACH
Source: J.P. Morgan Asset Management. Required minimum distributions are based on 2022 proposed table. Returns are based on a hypothetical portfolio, assumed to be invested 40% in the MSCI All Country World Index and 60% in the Barclays Capital U.S. Aggregative Index. Market performance simulation based on J.P. Morgan’s Long-Term Capital Market Assumptions and the charts show 80% confidence level based on 10,000 simulations across various market scenarios. The assumptions are presented for illustrative purposes only. They must not be used, or relied upon, to make investment decisions. There is no direct correlation between a hypothetical investment and the anticipated future return of an index. Past performance does not guarantee future results.
Disclosures
This inaugural report was produced through a collaboration between J.P. Morgan Asset Management and the Employee Benefit Research Institute (EBRI), a Washington, D.C.-based organization committed exclusively to public policy research and education on economic security and employee benefit issues. This “Insights to Action” series was produced by J.P. Morgan Asset Management (JPMAM) alone and includes JPMAM’s view only.
In an ongoing collaborative effort, the Employee Benefit Research Institute (EBRI) and the Investment Company Institute (ICI) maintain the EBRI/ICI Participant-Directed Retirement Plan Data Collection Project, which is the largest, most representative repository of information about individual 401(k) plan participant accounts. ICI is the leading association representing regulated funds globally, including mutual funds, exchange-traded funds (ETFs), closed-end funds, and unit investment trusts (UITs) in the United States, and similar funds offered to investors in jurisdictions worldwide. While this paper uses data from the EBRI/ICI database, ICI did not participate in the research collaboration between EBRI and J.P. Morgan Asset Management and was not involved in the writing of this paper.
EBRI is not affiliated with JPMorgan Chase & Co. or any of its affiliates or subsidiaries.
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