J. P. Morgan Tells Its Advisors to Assume Retirees Will Live to 100

Longevity may be the most important trend we’ve ever experienced. It’s driven by — and in turn, it affects — everything from health to housing, money to technology, lifestyle to social policy. There’s so much to be aware of — and it’s just getting started! Now you can keep up with all the latest developments in this weekly column.

 

Sometimes a story appears whose symbolic value is more powerful than its specifics. That’s how I reacted to this report that J. P. Morgan Asset Management Advisors is telling its advisors “to plan for clients to live to 100 if they are in excellent health and non-smokers.”

The advice is contained in the firm’s new retirement guide. Last year, Morgan said advisors should plan on the average retirement lasting 30 years — that would be to age 95, assuming the “traditional” retirement age of 65. This year, they’ve crossed the century mark. Do you need any more confirmation of the pervasiveness of extreme longevity?

Of course, once we’ve finished oohing and ahhing at the headline, we then get into the grubby details. Exactly how do you manage a retirement that could go to age 100? How much money is needed? Where’s it going to come from? I’ve written before about the problem of “outliving your money” — a phenomenon we’ve never had to face on any large scale before — and it seems to be getting more acute.

The language of the J. P. Morgan retirement guide, as reflected in this article, seems almost unnaturally restrained on this topic (at least, to my eyes): “Too few Americans have calculated what it will take to be able to retire at their current lifestyle. Retirement checkpoint calculations can help investors to quickly gauge whether they are ‘on track’ to afford their current lifestyle for 35 years in retirement based on their current age and annual household income.” Notice how innocent, almost unobtrusive, “35 years in retirement” seems!

To be fair, the guide does enumerate the challenges, made more serious now by the appearance of inflation. The old norms — for example, the traditional four per cent withdrawal rule, would handle at 30-year retirement if the portfolio was $1 million, but wouldn’t be enough for a 35-year retirement.

Reality Check:

• One in four Americans have no retirement savings at all
• According to research by the Federal Reserve, the median retirement account balance in 2019 was … wait for it … $65,000.
• That includes all ages. If we focus on the older segment, those who are immediately next to retire — i.e., 55-64 — the median retirement kitty is a big fat juicy $120,000. Not close to being enough

To be fair to J. P. Morgan, this is not really representative of the clientele they are dealing with. For example, their Retirement Link program, which focuses on 40lK plans, “is designed for plans with $500,000 to $100+ million in assets.” So their clients hardly belong in the “median” pool.

That said, their clients — or at least, enough of them to prompt the concerns expressed in their new retirement guide — do face problems and need new approaches in trying to fund a lifespan that extends to 100. The convention wisdom was that retirees should have nothing but conservative investments, for the obvious reason that they had little or no time left to recover if, at 65-plus, anything went wrong. True in previous generations, but now out of date, given extreme longevity. The new imperative, according to the guide: “Investing a portion of your portfolio for growth is important to maintain your purchasing power over time, particularly in an inflationary environment.”

Makes perfect sense. But at the same time, a huge percentage of people 65 or a bit older are coming to the conclusion, every single day, that there is realistically no retirement plan that will do the trick, and that they have to keep on working. Luckily, many actively want to keep working, because it keeps them younger and more relevant. And — Luckily No. 2 — it looks increasingly like society needs them to keep working to offset the decline (in some countries, the looming collapse) of the percentage of younger workers.

It all adds up to an entirely new world. You can expect more stories from me on new investment strategies as well as on new income-earning opportunities and trends, as the people who are doing the aging today continue to destroy the traditional model of retirement at 65. This is a topic that’s just getting started.

David Cravit is a vice-president at ZoomerMedia, and chief membership officer of C.A.R.P. He is also the author of two books on the “reinvention” of aging. You can check out some of his other writing here.

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