Skip to main content

You are here


How SECURE 2.0 Presents Numerous Opportunities

401(k) Education

Whether it’s increased tax credits to encourage small businesses to create retirement plans or changes to help with addressing emergency savings and student loan debt, the SECURE 2.0 Act offers numerous opportunities for advisors, according to J.P. Morgan Asset Management’s 2023 Guide to Retirement.

This week the firm released its 11th edition of its annual Guide to Retirement, analyzing the most significant issues impacting retirement to help advisors and their clients, as well as DC plan participants, make informed planning decisions and take actions to achieve a secure retirement.

"Retirement investors have experienced unprecedented volatility in the market throughout the last year, and face uncertainty for the year ahead. However, we feel optimistic for the future of retirement security as legislators and policy makers are emphasizing the need for broader access to retirement plans and an increase in savings rates,” Michael Conrath, Chief Retirement Strategist, J.P. Morgan Asset Management, said in a statement. “Our 2023 Guide to Retirement has been designed to help advisors navigate the evolving economic environment, take advantage of recent legislative changes, and provide long-term investing strategies to drive stronger retirement outcomes for clients.”  

Totaling 52 pages, this year’s edition includes five key retirement themes, including the impacts of SECURE 2.0, the importance of staying invested throughout volatility, and the need to align portfolios to long-term financial goals.

Opportunities presented by SECURE 2.0 Act: Noting that people are more likely to save for retirement when they have access to an employer-sponsored retirement plan, the Act will encourage small businesses to create retirement plans through increased tax credits. To that end, the guide explains that (1) this provision specifically addresses nearly 50% of private-sector employees working for small businesses that have no employer-sponsored plans and (2) those who have employer-sponsored plans are nearly twice as likely to save towards retirement.

Importance of building an emergency reserve: Spending and income shocks are prevalent for workers and retirees alike. Retirees encounter more shocks in larger amounts than workers, likely due to unpredictable healthcare costs. Those who don't have an emergency reserve often tap their retirement portfolios prematurely and jeopardize their retirement success. Pointing to Chase consumer data, the guide suggests that workers need about 2-3 months of pay in an emergency reserve and 3-6 months of pay for retirees.

Strategic adoption of tax-advantaged accounts: Individuals should consider diversifying their sources of retirement income. Maintaining a healthy mix of taxable, tax-free (Roth) and tax-deferred accounts can provide greater flexibility and control when managing income taxes over time.

Aligning your portfolio with your goals: Individuals may have different methods for funding their lifestyle in retirement, whether that's growing their portfolio, maintaining or spending some of their principal. For those who are spending principal, consider a dynamic spending strategy or protected income to meet current and future spending needs. The firm’s research indicates that spending may increase in retirement for healthcare but decrease in other categories such as food and beverage, and apparel and services in retirement.

Take a long-term view on inflation and the markets: Staying invested tends lead to a better retirement outcome as some of the market's best days occur very close to the worst days. The guide emphasizes that missing the 10 best days over the past two decades reduced the annualized return by almost 50%; missing the top 40 days resulted in a negative annualized return on the original investment.

To view the full 2023 Guide to Retirement, click here.