J.P. Morgan: Credit card debt a retirement hurdle for many

Nearly half of retirement plan participants carry credit card debt, a factor that increases the likelihood they’ll take a loan from their retirement accounts, according to a new report from J.P. Morgan Asset Management.

The “Retirement by the Numbers” study found that high credit card balances are linked to lower contribution rates and smaller account balances — reducing retirement readiness by up to 40% for older participants.

The research drew on data from 16,000 defined contribution plans, more than 12 million participants from Employee Benefit Research Institute databases and spending patterns from 5 million-plus anonymized Chase households.

“Financial health matters, and the financial pressures outside of retirement plans directly affect savings behavior and long-term financial security,” Michael Conrath, chief retirement strategist at J.P. Morgan Asset Management, said in a statement. “Our latest ‘Retirement by the Numbers’ research provides actionable insights to help sponsors design plans that reflect how participants actually save and spend.

“Since defined contribution plans continue to serve as the primary retirement vehicle for many Americans, it’s important for plan sponsors to align plan features with real-world participant behaviors to help drive stronger retirement outcomes.”

The study also found that retiree spending gradually declines by more than 30% between ages 60 and 85 — with 60% of new retirees experiencing annual fluctuations of 20% or more.

The report noted that increasing contributions by just 1% starting at age 25 could fund nine years of average Medicare-related expenses.

“When it comes to retirement plans, there is no one-size-fits-all approach. Average income replacement needs can vary widely depending on pre-retirement salaries and Social Security benefits received,” said Sharon Carson, retirement strategist at J.P. Morgan Asset Management.

“These findings highlight the importance of flexible, personalized retirement solutions and challenge conventional thinking around static income replacement rate assumptions.”

Nearly 70% of participants in defined contribution plans are invested in target date funds — emphasizing the role of disciplined investments in shaping retirement outcomes.

“Participant behaviors are critical in shaping retirement outcomes but they are only part of the equation,” said Dan Oldroyd, SmartRetirement portfolio manager for J.P. Morgan Asset Management. “This year’s findings reconfirm that investment design alone cannot make up for low savings rates, and thoughtful plan features are essential to supporting long-term outcomes.

“SmartRetirement continues to strive to deliver successful participant outcomes by integrating participant behaviors with forward-looking Long-Term Capital Market Assumptions, but the greatest impact comes when investment strategy is paired with disciplined saving.”