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10 Charts About Retirement Every Retiree Should See (2020)



As a Retirement Planner, each year I eagerly await the release of J.P. Morgan’s Guide to Retirement. It is essentially a booklet of retirement charts filled with great information impacting retirees. Making it even better, it often highlights things that are regularly overlooked by just about anyone (including professionals) planning for retirement today. With that in mind, I have selected 10 charts that I think everyone transitioning into retirement should see with a little commentary on each. Every chart comes directly from their guide and credit for each chart’s information is provided within the guide itself.

1. Life Expectancy Probabilities

Page 5 of the JP Morgan Guide to Retirement 2020 Edition

When asked how long they’ll live, many retirees will respond late 70s or early 80s. Not all that surprising considering the average life expectancy for the average man and woman is 83 and 85 respectively. However, that ignores the average joint life expectancy of approximately 90 years old for 49% of the population and the 20% that live to age 95.

But what makes their estimates even less likely to be accurate is that we must remember these are averages! I’ll bet that if you are reading this site that you are not average. You’ve likely made above-average income, had above average healthcare, lived a less physically demanding life and concurrently eaten a healthier overall diet. If that’s true, then you are likely to be on the high side of all of the above estimates. That being the case, imagine what your portfolio will need to do to maintain your standard of living over a 25 or 30 plus year retirement.

2020 Update: The average life expectancy from 2017 to 2018 decreased by 0.1 for folks turning age 65 in 2018 versus 2017.

Related reading: Retirees Underestimate the Impact of Longevity & Inflation

2. Older Americans Are Working Longer

Page 6 of the JP Morgan Guide to Retirement 2020 Edition

While there are plenty of people that can’t wait to retire, I’m finding more and more people want to keep working. I’ve said before that I have a few clients that have been telling me they are going to retire in “a year or two” for close to a decade. This observation is evident in the data. It appears that the major motivations to continue working later in life are mostly to stay active and simply because they enjoy working.

3. Though Not Everyone Can Keep Working

Page 7 of the JP Morgan Guide to Retirement 2020 Edition

Despite the fact that 68% of workers anticipate retiring at age 65 or older, many are not able to for a variety of reasons. 35% attribute retiring earlier than planned to health problems and another 35% to changes at their company. I’ll be curious to see how these numbers change over the next year due to COVID-19 as many people are being forced out of work. This is why it is probably wise to be prepared financially speaking for retirement earlier than anticipated. I realize that is easier said than done sometimes.

4. Maximizing Social Security – Median Earner

Page 10 of the JP Morgan Guide to Retirement 2020 Edition

When comparing Social Security claiming strategies, the chart above shows:

In this illustration, the recipient earned $70k per year and retired just prior to turning 62. The Social Security recipient would breakeven around age 76 if they chose to delay claiming until Full Retirement Age versus claiming at age 62. And they would breakeven around age 80 if they chose to delay claiming until age 70 versus Full Retirement Age.

As an FYI, the breakeven age from claiming at age 70 versus claiming at age 62 is approximately 83 years old – not bad when you consider the average joint life expectancy age is almost 90 years old! You would need a strategy to bridge the gap between 62 and 70 if you retire earlier than most.

Related reading: Should You Wait Until 70 For Social Security?

5. Income Replacement Needs in Retirement

Page 15 of the JP Morgan Guide to Retirement 2020 Edition

As we can see based on the chart – the more income you make, the less we can expect to receive from Social Security as a percentage of our pre-retirement income. So, obviously, the more you make, the more you will be reliant on your own savings.

One observation I have in working with many retirees though is given that the typical retirement week consists of six Saturdays and a Sunday, I am not sure there is a noticeable difference in pre-retirement spending and post-retirement spending. I think this is especially true early on in retirement when many retirees travel abundantly. If anything they may see an increase in spending.

That said, I still think the replacement rate of 74% could still be accurate given that I would anticipate many people reading this site have above average savings rates which would increase the top-line number they call “Less pre-retirement savings.” If you are saving 20%, 30% or more of your income as many of my clients are, a 74% replacement rate may be pretty accurate if not more than enough.

Related Reading: Why Saving In Your 60s Is So Important – It’s Not the Reason You Think

6. Health Savings Account (HSA) Savings Are Triple-Tax-Advantaged

Page 20 of the JP Morgan Guide to Retirement 2020 Edition

The sheer value of a Health Savings Account from a tax perspective cannot be overstated. There are three primary tax benefits from investing in an HSA:

  1. Immediate reduction to taxable income (pay less taxes now).
  2. Tax-deferred growth on your investment.
  3. Tax-free withdrawals if used for qualified healthcare expenses.

Given this trifecta of tax benefits, if you are participating in a High Deductible Health Plan and financially able to do so, fully funding your HSA is a no-brainer.

7. Average Household Spending By Age & Category

Page 22 of the JP Morgan Guide to Retirement 2020 Edition

Even as people transition into retirement and continue to age, it’s not all that surprising that as we age, we see a decrease in expenses across a broad range of categories. This is a good example of why spending slightly more at the beginning of retirement isn’t necessarily a bad idea since you are likely to pare down spending over time.

The three areas where we see a noticeable increase in spending over time are health care (no surprise), housing excluding mortgage, and charitable giving.

8. The 4% Rule Sure Seems To Be Spot On Even After All These Years

Page 26 of the JP Morgan Guide to Retirement 2019 Edition

This is my favorite visual from the entirety of the Guide to Retirement 2019 edition and they chose not to keep it for 2020. But I am keeping it here since questions about withdrawal rates are very popular. The transition point for sustainable income appears to be right at the 4% withdrawal rate over a 30 year period almost regardless of allocation. Beyond 4%, the retirement waters look a little choppy to me.

That said, there could be an argument for withdrawing a little more in the early years and paring down later. Or an alternative strategy below…

9. Dynamic Spending Can Help Your Money Last Longer

Page 26 of the JP Morgan Guide to Retirement 2020 Edition

Here are the assumptions for the chart as written on their slide:

Retire at age 65 with $1,000,000 and withdraw 5.2% of the initial portfolio value ($52,000). “Withdrawal annually increased each year by inflation” assumes 3% inflation rate. Dynamic withdrawal scenario assumes that if the annual rate of return on portfolio is: 1) less than 3%, withdrawal remains the same as the prior year. 2) between 3% and 15%, withdrawal is increased by inflation (3%). 3) greater than 15%, withdrawal is increased by 4%. While the dynamic withdrawal scenario during this historical period provided 14% more total spending in today’s dollars, it is for illustrative purposes only and may not be successful during other time periods.

As the data shows, altering spending patterns based on a rules-based market performance approach extended the portfolio’s life by over five years. I really don’t have much to add to their assumptions besides saying that I advocate for a rules-based approach as well and find this strategy compelling. That said, there are a variety of strategies that are viable options to get you through retirement. But just like most everything else with portfolio management, finding a strategy that you can stick with is likely to lead to the best personal results.

10. The Probability of Needing Long Term Care

The probability of needing care is extremely high at 69% as indicated in the top chart. But the duration of care needed for about 50% of people is less than 90 days. However, in every length of care required beyond 90 days, women are the likely candidate with almost 1 in 5 women needing care for more than five years which is just staggering to me. It might go without saying, but having a plan to deal with these possibilities is critical.

Related reading: How to Pay for Long-Term Care

If these charts have you interested, I’d encourage you to check out all the retirement charts by going to the actual guide here: J.P. Morgan Guide to Retirement 2020. Making it an even stronger source of retirement information, every chart has the location for the source data, so if you really want to dig in, you can. Enjoy.

Thanks for reading!
Ashby Daniels

If you’re looking for a retirement planner to help you make a comfortable transition into retirement and want to see if we’re a good fit, reach out to me here.

This post is not advice. Please see additional disclaimers.

The post 10 Charts About Retirement Every Retiree Should See (2020) appeared first on Retirement Field Guide.

By: Ashby Daniels, CFP®
Title: 10 Charts About Retirement Every Retiree Should See (2020)
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Published Date: Wed, 01 Apr 2020 13:02:00 +0000

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Ends-of-the-World Every Year Since 1970



There always has been and always will be a reason not to invest or not to stay invested. This is all the mainstream media reports to us. Below you will find a list of some of the worst global events each year since 1970. I have some commentary to follow.

1970: War: US troops invade Cambodia.
1971: Civil Unrest: Anti-war militants march on Washington.
1972: Political: Start of Watergate Scandal.
1973: Economic: OPEC raises oil prices in response to US involvement abroad.
1974: Political: Nixon resigns as President of the United States.
1975: Political: Multiple assassination attempts on President Ford.
1976: World: Ebola virus.
1977: Political: Government shutdowns.
1978: Market: U.S. Dollar plunges to record low against many European currencies.
1979: World: Iranian militants seize the U.S. embassy in Teheran and hold hostages.
1980: Economic: Inflation spiked to a high of 14.76%.
1981: Political: President Reagan assassination attempt.
1982: Economic: Recession continues in the U.S. with nationwide unemployment of 10.8%.
1983: Economic: Unemployment in the U.S. reaches 12 million.
1984: Economic: 70 U.S. banks fail during the year.
1985: World: Multiple airplane hijackings around the world.
1986: World: Chernobyl Nuclear Power Station explodes.
1987: Market: DOW drops by 22.6% on October 22.
1988: Environment: Awareness of global warming and the greenhouse effect grows.
1989: Environment: Exxon Valdez dumps 11 million gallons of crude oil into Prince William Sound.
1990: World: Persian Gulf War starts.
1991: World: Mass shooting in Killeen, TX.
1992: Human Rights: Los Angeles riots following the death of Rodney King.
1993: Terrorism: World Trade Center bombing.
1994: World: Mass genocide in Rwanda.
1995: Terrorism: Oklahoma City bombing.
1996: Terrorism: Olympic Park bombing.
1997: World: Bird flu.
1998: World: Multiple U.S. embassy bombings.
1999: World: Columbine shooting.
2000: Economic: Start of the Dotcom Market Crash.
2001: Terrorism: Terrorist Attacks in NYC, DC & PA.
2002: Economic: Nasdaq bottomed after a 76.81% drop.
2003: World: The U.S. invades Iraq.
2004: World: The U.S. launches an attack on Falluja.
2005: World: Hurricane Katrina
2006: World: Bird flu.
2007: Economic: Start of the Great Recession.
2008: Economic: Great Recession continues.
2009: Economic: S&P bottomed after a 56.8% drop.
2010: Market: Flash crash.
2011: Market: Occupy Wall Street and S&P downgrades U.S. Debt.
2012: Political: Fiscal cliff.
2013: Political: Taper tantrum.
2014: World: Ebola virus.
2015: World: Multiple mass shootings.
2016: Political: Divided U.S. Presidential election.
2017: World: North Korea testing nuclear weapons.
2018: Economic: U.S. & China trade war.
2019: Economic: Student loan debt reaches an all-time high of $1.4 trillion.
2020: World: COVID-19.

While many of these events were undoubtedly terrible (and there are certainly others not named here that were worse), most of these were broadcast as end-of-the-world events for the stock market. Despite that attention, it is worth noting that these were, for the most part, one-time events. In other words, most faded into the newspapers of history. We moved on.

Obviously, some caused monumental shifts in the way the world works. Just think about how much air travel continues to be impacted by the events of 9/11. But, outside of the resulting inconveniences (if we want to call safety protocols inconveniences) associated with air travel, flying is safer than ever before.

Take a look at just about any of the events and you will find there are many that people will hardly remember. My point here isn’t that these events are to be ignored or that they were easy to stomach at the time, but that they have become a distant memory.

I want to also make the point that we should expect these types of negative events. As investors, we know these types of crises, economic catastrophes, and global phenomena are going to happen.

But in almost all cases, here is what we can say in the next breath – this too shall pass.

Will there be legal, humanitarian, economic, or some other aid required as a result of these events? Almost certainly the answer is yes, but that doesn’t mean it they won’t eventually fade into history.

Lastly, what’s worth noting is how the market has performed over these last 50 years despite the continual advertisements of the world crashing down around us. On January 2, 1970, the Dow Jones stood at 809 and the S&P at 90 -> those are not typos. These same indexes have grown (not including dividends) to 26,387 and 3,232 respectively. Amazing, no?

Perhaps what gets overlooked more than anything else is what separates the above one-time negative events from the positive stories that go largely ignored over our lifetimes. And that is a story worth telling. See the companion post below:

Unheralded Positive Events Every Year Since 1970

Stay the Course,

Retirement Field Guide Mission:

“To help 10 million people make better retirement decisions.”

If you would like to join us in achieving our mission, I hope you will consider sharing our site if you have found it helpful in your own retirement planning.

This post is not advice. Please see additional disclaimers.

The post Ends-of-the-World Every Year Since 1970 appeared first on Retirement Field Guide.


By: Ashby Daniels, CFP®
Title: Ends-of-the-World Every Year Since 1970
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Published Date: Tue, 04 Aug 2020 13:26:19 +0000

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Wildfire prone property insurance bill in California due for hearing



The post Wildfire prone property insurance bill in California due for hearing appeared first on Live Insurance News.

The bill is expected to be heard in upcoming weeks as opposing sites prepare for major battle.

A new California bill, the outcomes of which will have a lot to say about coverage for wildfire prone property in the state, will soon be headed for hearing. The hearing is expected to be a heated one as strong opposing opinions have the opportunity to be voiced.

Opponents of this bill are calling it a direct attack on consumer protections in insurance.

That said, proponents of the bill claim it is the best method for making coverage available to wildfire prone property in California. The bill in question is Assembly Bill 2167. It was written by Assemblyperson Tom Daly (D-Anaheim). If it passes,it will create the Insurance Market Action Plan (IMAP) program. The IMAP program is meant to protect residential properties.

So far, AB 2167 has progressed quickly, when taking into consideration that a chunk of the legislature has been considerably restricted by pandemic crisis precautions. It was first presented in early June and backers have been saying that it was brought forward in good timing and that it has all the momentum it needs to be passed.

That said, AB 2167 has not been without opposition. In fact, it has faced considerable opposition, having been called an attack on Proposition 103, insurance consumer protection law. California Insurance Commissioner Ricardo Lara lobbed that argument at it, calling it an “insurance industry wish list, with nothing to help consumers,” and Consumer Watchdog, whose founder, Harvey Rosenfeld, was the original author of Proposition 103.

The insurance industry strongly supports the bill, saying it will help wildfire prone property coverage.

Insurance organizations such as the American Property Casualty Insurance Association and the Personal Insurance Federation both support AB 2167. The bill also has the support of the California Association of Counties (CSAC), as well as Fire Safe Councils of California, and the CalFIRE union.

The Consumer Federation of America, another watchdog organization, has predicted that if AB 2167 passes, it will cause 40 percent increases in insurance rates. On the other hand, insurance groups claim that the bill offers owners of wildfire prone property a greater opportunity for choice and competition among insurance companies based on coverage and premiums while avoiding the limitations and high costs associated with FAIR Plan coverage.

The post Wildfire prone property insurance bill in California due for hearing appeared first on Live Insurance News.


By: Marc
Title: Wildfire prone property insurance bill in California due for hearing
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Published Date: Fri, 14 Aug 2020 09:00:14 +0000

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Is this the last hurrah for bonds?



Recently, I have written quite a bit about the long-term return expectations for investing in bonds. See here, here, here and here.

Spoiler alert: I don’t think it’s good.

But long-term bonds this year have been quite an amazing story as the COVID pandemic has caused the Fed to take historically monumental actions. As a result, we’ve watched long-term Treasuries tear the roof off the market. For instance, a 20+ Year Treasury Bond ETF (name withheld for compliance purposes) is up more than 31% YTD as of July 31st.

That is insane!

But there is a good reason for this increase shown below.

The red circle shows a decrease in the 30-year Treasury rate of almost 40% over a span of six months. That’s practically unprecedented with only two periods (2008 and 1981-1982) having similar declines over such short periods.

But this begs the question: Is this the last hurrah for bonds as a driver of any meaningful return? Below is the 30-Year Treasury rate over the last 40+ years.

For what it’s worth, people have been forecasting the end of the bond bull market since 2012 (maybe even earlier) and yet it has continued despite those predictions. But at some point, the bond party will come to an end.

The Fed has been clear that they are going to keep rates stable until at least 2022 which means this may not change for a little while longer. Or in the near term, I could even see the high returns continuing if we experience pandemic economic shutdown round two.

But, I can’t see a world where this is the case for much longer than that – most importantly over the span of a 30-year retirement.

The official end of the bond bull market depends on a recovery from the pandemic economy as well as a few other factors causing rates to rise. But when they do, it seems likely to me that this may be the last great hurrah for bonds for quite some time.

The question is when to get off that train and that undoubtedly requires a personal answer.

Stay the Course,

Retirement Field Guide Mission:

“To help 10 million people make better retirement decisions.”

If you would like to join us in achieving our mission, I hope you will consider sharing our site if you have found it helpful in your own retirement planning.

This post is not advice. Please see additional disclaimers.

The post Is this the last hurrah for bonds? appeared first on Retirement Field Guide.


By: Ashby Daniels, CFP®
Title: Is this the last hurrah for bonds?
Sourced From:
Published Date: Wed, 12 Aug 2020 13:47:16 +0000

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