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J.P. Morgan Releases "Breaking The 4% Rule," A Landmark Research Report That Lays The Groundwork For An Innovative Approach To Investing And Withdrawing Income In Retirement

NEW YORK, Feb. 27, 2014 /PRNewswire/ -- In a groundbreaking new study, J.P. Morgan researchers have developed a revolutionary new method for investing and withdrawing funds that improves the likelihood that retirees will be able to maintain their living standards, reduce the risk of running out of money and optimize their overall satisfaction. By creating a smarter and more personalized way to invest and withdraw money in retirement, this study, "Breaking the 4% Rule," lays the foundation for a dramatic shift in how people think about their retirement income strategy.

To read the executive summary of the report, visit

As a first step, this study identifies the shortcomings of conventional and more rigid withdrawal methods, particularly the well-known "4% Rule," which could expose retirees to unnecessary risks that they will outlive their retirement assets or, conversely, leave too much wealth untapped. In particular, J.P. Morgan's new "Dynamic Withdrawal Strategy" shows retirees and their advisors how they can adjust their withdrawal rates and portfolio allocations in response to changes in personal circumstances and preferences, as well as market conditions.    

"Beyond the inevitable comparisons to other methods, this research sets the stage for the first retirement income framework focused on the benefits of a dynamic approach to managing withdrawals and asset allocation in the context of maximizing retiree satisfaction," said Michael Falcon, Head of Retirement at J.P. Morgan Asset Management. "This unique strategy aims to incorporate the concept of 'lifetime utility' – or satisfaction – which defines retirement success as the fulfillment retirees gain from living life to the fullest while spending their retirement savings."

The Dynamic Withdrawal Strategy incorporates five distinct factors: (1) personal preferences for the amount and timing of withdrawals, (2) wealth and "lifetime retirement income," which the study defines as guaranteed income, such as social security, pensions and lifetime annuities, (3) age and life expectancy, (4) the randomness of markets and extreme events, and (5) the dynamic nature of each retiree's decision-making process.

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