5 Keys to a Smart Retirement Strategy By: Anne Lester

A decade has passed since the Pension Protection Act of 2006 was signed into law—and the SmartRetirement® suite of target date funds was launched from J. P. Morgan Asset Management. Anne Lester, Head of Retirement Solutions and Portfolio Manager of the funds, shares some of what she’s learned about retirement investing and security over the past ten years.

Build flexible, diversified solutions


The Pension Protection Act (PPA) helped to strengthen defined contribution (DC) plans in many ways. In particular, it paved the way for growing adoption of target date funds. These are professionally managed, welldiversified solutions whose asset allocation changes with an employee’s age. Wellexecuted, they can adapt to shifts in markets and participant behavior.

Manage for real-life participant behavior

J.P. Morgan’s SmartRetirement strategies draw on extensive research into plan participant behavior. One lesson we havelearned: Participants aren’t model savers. They save too little and too late, borrow too much and too often from their 401(k)s. And no wonder. Life circumstances change as people buy homes, confront unexpected medical expenses and struggle to balance the needs to save for a child’s college education as well as their own retirement. Instead of building solutions for model savers, we must build solutions that address the messy realities of participant behavior.

"We need to build solutions that address the messy realities of participant behavior" - Anne Lester



Harness the power of human inertia

Plan sponsors can do a great deal to help their employees save and invest for retirement. Automatic enrollment allows plan sponsors to enroll employees in a DC plan unless they explicitly opt out. Automatic contribution escalation automates annual increases in participant savings (also with an optout clause). Implemented together, this is a powerful combination that can help drive retirement savings. Presented with an opportunity to make a choice, people often do…nothing. Such is the force of human inertia. Automatic plan features allow inertia to work for—not againstplan participants.

Take the investment decision off participants’ shoulders 

Still, inappropriate asset allocation for plan participants remains a critical problem. Many participants are far from investment experts, and yet if they’re choosing investments from the plan menu themselves they are often making decisions with important implications for their future in less time than it takes to eat lunch. Plan sponsors can help reset participant investments by using a strategy known as reenrollment. In this process all participant assets are defaulted into a qualified default investment alternative like a target date fund unless a participant makes a different choice. However, only about 7% of DC plans have taken this approach—though our 2016 plan participant research shows that over 80% of participants are supportive of reenrollment. Greater adoption could make a real difference.

Manage risk dynamically and holistically

Many different factors contribute to a successful retirement outcome. Participants can control some—how much they save vs. spend, for example. But other factors, such as market returns, are completely beyond their control. The range of factors, and the changing interplay among them, makes managing risk in a DC plan a complex task. A retirement strategy should not focus so much on one risk—protecting against market declines, for example—that it gives short shrift to another—delivering sufficient growth to ensure savings last as long as they are needed. Target date strategies that manage risk dynamically and holistically can deliver steadier performance in a broader range of market conditions and help more participants reach a secure retirement.

Anne Lester is a portfolio manager and Head of Retirement Solutions for J.P. Morgan Asset Management’s Global Investment Management Solutions.

Anne Lester is a portfolio manager and Head of Retirement Solutions for J.P. Morgan Asset Management’s Global Investment Management Solutions.


The views contained herein are not to be taken as an advice or a recommendation to buy or sell any investment in any jurisdiction, nor is it a commitment from J.P. Morgan Asset Management or any of its subsidiaries to participate in any of the transactions mentioned herein. Any forecasts, figures, opinions or investment techniques and strategies set out are for information purposes only, based on certain assumptions and current market conditions and are subject to change without prior notice. All information presented herein is considered to be accurate at the time of writing, but no warranty of accuracy is given and no liability in respect of any error or omission is accepted. This material does not contain sufficient information to support an investment decision and it should not be relied upon by you in evaluating the merits of investing in any securities or products.

TARGET-DATE FUNDS: The JPMorgan SmartRetirement Funds are target date funds with the target date being the approximate date when investors plan to start withdrawing their money. Generally, the asset allocation of each Fund will change on an annual basis with the asset allocation becoming more conservative as the Fund nears the target retirement date. The principal value of the Fund(s) is not guaranteed at any time, including at the target date.

There may be additional fees or expenses associated with investing in a Fund of Funds strategy. Asset allocation/diversification does not guarantee investment returns and does not eliminate the risk of loss. J.P Morgan Funds are distributed by JPMorgan Distribution Services, Inc.
Anne Lester

Anne Lester is a portfolio manager and Head of Retirement Solutions for J.P. Morgan Asset Management’s Global Investment Management Solutions, where she is responsible for advancing the firm’s market-leading retirement investment product offering and thought leadership. Ms. Lester has also been responsible...

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