JPM Guide to Retirement

[suomalainen]

https://am.jpmorgan.com/us/en/asset-man ... retirement

I actually thought this was an extremely well presented mainstream "guide to retirement" that goes far beyond the usual dumb CFP guidelines (even though it has some of that too) - it includes concepts like portfolio allocations, 4% rule flexibility, sequence of return risk, budgeting guidelines, mix of income streams, etc. Plus, it's fancy and glossy and smooth, like a proper WSP product. Some of it could have been a rip-off of @Tyler's portfolio charts, so I'll put in a cross link to that thread.

[Fish]

Very good form, though I note they are still framing retirement savings goals as an “income replacement rate” instead of “years of expenses”. (I suppose most households are not aware of exactly how much they spend?) The state of the art for traditional retirement has not advanced in over 20 years. Early retirees in 1999 were already considering variations on 4% rule, asset allocation, sequence of returns risk, and longevity. I suppose what is changing is how this is presented to the mainstream, though I have read books containing all of this from 2007 and earlier. It appears the goal of the publication is to sell financial management services on the premise that retirement planning is a very complex subject. Which for the general public seems like a reasonable recommendation. Not everyone has the inclination to DIY.

[jennypenny]

I always wonder about the emphasis on income replacement instead of expenses. I assume it's because most people probably have a better handle on how much money they bring in as opposed to knowing how much they actually spend every month. If they currently make X per month and know how to live on that much, it's mentally easier to try to replace the income exactly then try to stick to a smaller, unfamiliar budget. Getting people to live responsibly on a fixed amount, even a familiar one, is probably all you can ask going into retirement. Learning to live on a smaller amount without accumulating debt is probably too much to ask. (obviously, not talking about people on FIRE forums)

Whether most people actually hit that goal is debatable, but it's not a bad target for people who don't like budgets.

[prognastat]

That and for many people income dictates expenses as they just spend what comes in.

[suomalainen]

Agreed. I mean, they use 6%!! as the savings you will no longer need to make in retirement. But, all in all, for a popular sales-y product/info packet, I thought it was much more informative than the other things I’ve seen over the last 10 years or so.

[IlliniDave]

jennypenny, I think you're exactly right, and it's pretty standard. My employer negotiated an arrangement with an advisory service for the 401k and what they tell me matches what the Fidelity tools tell me. I will need income that is 3X-4X what I intend to spend. Of course that translates to saving a ton more money and working until 65. I think basing retirement spending on ~80% of pre-retirement is sort of the easy button.

[prognastat]

Another factor might be that that for many investment services you investing 3-4x as much as you need means more money under their management earning fees...

So not only is it easier, it's probably also more lucrative for the firms giving this advice.

[Tyler9000]

Some of it could have been a rip-off of @Tyler's portfolio charts.

Honestly I wish more of my ideas would catch on enough to be spread by JP Morgan.

I like how thorough this is and how it does go the effort to try to explain uncertainty. Thanks for sharing!

That said, I agree that it has a lot of old-school assumptions built in. For example, it still basically promotes the classic idea of working to a normal retirement age saving 5-10% a year before replacing that income you've been trained to depend on. I interpret that as an indication that they understand their primary client base is Boomers who have been raised on those concepts. It will be interesting to see how a document like this might evolve over the years.

[arcyallen]

Another factor might be that that for many investment services you investing 3-4x as much as you need means more money under their management earning fees...

So not only is it easier, it's probably also more lucrative for the firms giving this advice.

I've heard this before, and I think the other side of that is if I was a sleazy advisor I could tell people "Those guys at (JPM) say it'll take HOW LONG? I can get you retired much faster...". I think assigning intent here would be a mistake.

[unemployable]

I dunno; I get a lot of "how the other half lives" vibes, and there's still too much math for them to deal with. A 5% savings rate throughout. Lots of time dicking around with when to take Social Security and what what Roth IRAs do.

Slides 13, 18 and a few others gave me a laugh, as if JP Morgan returns your phone calls if you make less than $100k.

Slides 24 and 25 -- notice they use a 40/60 allocation -- that's 40 stocks/60 bonds, and then compare it to things like 20 stocks/80 bonds. These are allocation strategies I've never heard of. I feel like 85/15 is solved science in the RE community; hell, slide 26 shows this. Most pensions and endowments are in the 70-75% stocks (+ things with stocklike returns) range.

Investment managers always and everywhere sell the idea that money is hard and you'll never have enough of it. Otherwise you wouldn't need their services.