J.P. Morgan Asset Management has released its annual “Guide to Retirement,” providing a detailed update on the retirement landscape and new insights into the saving and spending behaviors of retirees.

Planning for retirement can be overwhelming, the report says, as individuals must navigate various factors over which they have different levels of control. Some factors are out of their control, such as market returns, tax policies, legislative actions and regulatory reforms. On the other hand, they do have some control over other factors, such as longevity or how long they work.

According to the report, the best way to mitigate such wide-ranging challenges is to develop a comprehensive retirement plan and to focus on what can be controlled. This includes maximizing savings as early as possible, understanding and managing spending and being well-diversified from an investment and tax perspective.

Younger generations have had to take on more individual responsibility for saving and planning for retirement, the report says, in large part because companies continue to shift from defined benefit to defined contribution plans. Less than 10% of Generation Z will have access to a pension, while four in 10 Baby Boomers will. As the report notes, the demise of pensions raises the stakes when it comes to DC plan outcomes, and it increases the importance of efficient Social Security claiming strategies. There are also important questions for individuals to ask about the role of annuities in their overall retirement income plan.

Being financially successful in retirement requires consistent savings, disciplined investing and a plan, the report says. Analyzing how much of an investor’s income Social Security will replace is one important step in understanding if that investor is on track to afford her current lifestyle. It is also critical to assess the anticipated rate of return on invested assets and how this compares to inflation rates. If the amount falls short for their age and income, advisers and plan sponsors can help individuals develop a plan tailored to their situation.

Deciding how much to save for retirement depends on the investor’s circumstances, the report says. This includes their income, the age at which they start saving and the lifestyle they have become accustomed to. For a 25-year-old making less than $90,000, the necessary annual savings rate ranges from 3% to 8%, depending on return assumptions and time horizons, while a 50-year-old man may need to save between 13% and 38% of gross income to achieve the same outcome. These figures demonstrate how early savers have a much better chance of achieving retirement success.

The report emphasizes the importance of moving beyond a pure focus on savings and creating a rational spending plan for retirement. Most Americans’ peak spending years are at midlife, and thereafter spending tends to trend downward, until it trends up again at the oldest ages, the report says. The largest expenditure category at all ages is housing, while the category that older people spend significantly more on than younger people is health care. Housing and health care expenses may increase late in life due to the possibility of needing long-term care.

During periods of higher inflation, it may make sense for retirees to revisit their planning forecasts, though different households do not experience inflation to the same degree, the report says. When planning for retirement, advisers should use a long-term inflation assumption for spending that reflects what the household actually buys and how that will change with age.

For example, transportation was the highest inflation category in 2021 at 21.4%, the report says. Households older than 75 spend 4.5% less on transportation than households ages 35 to 44, and therefore they may not experience this high inflation to the same degree.

Health care expenses grow in retirement, and those with access to a health savings account can take advantage of the tax-free or tax-deductible contributions, tax-deferred earnings in the account and tax-free withdrawals for qualified health care expenses, the report says. The best way to take advantage of the tax-deferred compounding is to pay for reasonable health care expenses from funds outside of the HSA and instead wait to use the HSA for retirement.