J.P. Morgan's 5 Resolutions for Your Retirement Plan

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Jan 02, 2015, 12:30 ET

NEW YORK, Jan. 2, 2015 /PRNewswire/ -- The beginning of the new year is a great time to check in on your retirement savings plan, according to J.P. Morgan Asset Management Chief Retirement Strategist Katherine Roy. The firm has shared 5 tips for individuals to consider heading into 2015.

1. Know where you stand

"Whether you're nearing retirement or still several decades away, it's important to know where you stand now," says Katherine. Find out if you're on track with J.P. Morgan's Guide to Retirement savings checkpoint: http://bit.ly/jpm_gtr_check

2. 15 is the new 10

The single most important thing you can do is to target saving at least 15% of your gross annual income (before taxes) each and every year. Katherine offers these tips to help avoid "undersaving" and maximize your savings potential:

Pay yourself first with automatic deductions from each paycheck, so you are benefitting from dollar cost averaging throughout the year.
Max out on employer retirement plans – such as 401(k), 403(b) and 457 plans. The 15% target includes your employer match.
If you aren't covered by an employer plan, be sure to make your IRA contribution. If you are, consider a non-tax-deductible contribution to shelter more long-term income for income tax purposes.
Don't forget to take advantage of catch-up contributions if you're age 50 or over.
Get a better grasp of your spending behavior. The less you spend, the more you can save and invest.

Take a look at the chart to better understand the benefit of saving early from J.P. Morgan's Guide to Retirement: http://bit.ly/jpm_gtr_saveearly

3. How you invest matters

How you invest will have a large impact on how much you have at retirement. No matter how much you save, investing in a portfolio that is too conservative is likely to lead to a poor outcome. "You can't count on unrealistic investment returns to make up for saving too little," says Katherine. "Maintaining a disciplined, balanced saving and investment strategy is critical." And, now is a good time to take stock of how your retirement portfolio is allocated. http://bit.ly/jpm_gtr_returns

4. Prepare to pay more for health care in retirement

The estimated annual out-of-pocket health care costs for the average 65-year-old retiree is currently about $4,000 a year and, in 20 years, is projected to grow to more than $10,000. For someone with high prescription expenses, those costs are around $7,000 per year, projected to grow to more than $14,000 in 30 years. http://bit.ly/jpm_gtr_hccosts

Katherine advises, "ensure your retirement portfolio is positioned for this growing expense. With health care costs rising faster than inflation, we recommend planning for 7% to account for both health care inflation as well as higher spending on health care costs as you age."

5. Consider delaying Social Security

As you can see in the chart, for every year you delay taking Social Security beyond your full retirement age (age 66 for those born 1943-1954; age 67 for those born in 1960 or after), you can expect an 8% per year increase in benefits up until age 70. If you can't wait until age 70, at least hold off until your full retirement age. "If you start taking benefits earlier than full retirement age, you'll not only lock in reduced benefits for your lifetime, but benefits to your survivors could also be significantly reduced," says Katherine.
http://bit.ly/jpm_gtr_delay

A well-informed plan can help take some of the emotion out of saving and investing. Work with a financial advisor who can help you develop a plan and course correct along the way. Katherine recommends, "Meet with your financial advisor at least annually to ensure your retirement plan stays on track."

About J.P. Morgan Asset Management – Retirement

J.P. Morgan Retirement, part of J.P. Morgan Asset Management, is a leading provider of comprehensive retirement solutions and is dedicated to improving individual retirement outcomes. The group has defined contribution assets under management of nearly $135 billion, as of September 30, 2014.

About J.P. Morgan Asset Management

J.P. Morgan Asset Management, with assets under management of $1.6 trillion, is a global leader in investment management. J.P. Morgan Asset Management's clients include institutions, retail investors and high net worth individuals in every major market throughout the world. J.P. Morgan Asset Management offers global investment management in equities, fixed income, real estate, hedge funds, private equity and liquidity. JPMorgan Chase & Co. (NYSE: JPM), the parent company of J.P. Morgan Asset Management, is a leading global asset management firm with assets of approximately $2.4 trillion and operations in more than 60 countries. Information about JPMorgan Chase & Co. is available at www.jpmorganchase.com

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SOURCE J.P. Morgan Asset Management