Advisors should expect to plan for clients who live to 100 and spend about 35 years living in retirement, according to a new retirement guide issued by J.P. Morgan Asset Management.

That's an increase from last year, when the firm pegged the average retirement to last 30 years.

“Retirement investors and advisors are grappling with a range of challenging issues, from an evolving inflation picture, to an increase in forecasted spending needs in retirement, and ongoing questions around Social Security,” Katherine Roy, chief retirement strategist, said. “As planners, we want to be conservative so we tell advisors to plan for clients to live to 100 if they are in excellent health and nonsmokers.”

The wider timeline adds yet more variables to the much debated issue of how much money a person or couple needs for a comfortable retirement, according to the firm. A host of variables affect that answer, a panel of retirement experts from J.P. Morgan Asset Management said during a press briefing today.

Healthcare costs, inflation, withdrawal rates and Roth versus traditional IRAs are a few of the factors that can change each planning scenario, the panel explained.

The guide warns that “too few Americans have calculated what it will take to be able to retire at their current lifestyle. Retirement checkpoint calculations can help investors to quickly gauge whether they are ‘on track’ to afford their current lifestyle for 35 years in retirement based on their current age and annual household income.”

For instance, the traditional 4% withdrawal rule, based on a portfolio of $1 million, will last for a 30-year retirement, but will not be sufficient for a 35-year retirement, Roy said.

The guide advises, “Investing a portion of your portfolio for growth is important to maintain your purchasing power over time, particularly in an inflationary environment.”

“Runaway inflation and poor portfolio returns are the reasons most retirement plans fail,” Roy said.

The guide is based on a 2.3% inflation rate for 1982 through 2020, but notes that inflation soared to 7.1% last year. The guide warns advisors to keep inflation in perspective when planning for retirement, including planning for increases in the cost of healthcare and long-term care, while balancing other factors.

“For example, older households purchase more healthcare but less transportation than households age 35 to 44, making them less vulnerable to the volatile energy category than younger households,” J.P. Morgan Asset Management said.

“It is difficult to predict how long a person might need paid long-term care, so it is hard for advisors to make plans,” said retirement strategist Sharon Carson. “But half of those who live to age 90 or more will need paid care.”

Advisors face a growing challenge with the continued disappearance of defined benefit plans, according to Kelly J. Hahn, executive director of J.P. Morgan Chase & Co. “Advisors need to work with younger clients to determine how to generate retirement income” that used to be provided by defined benefit pension plans, Hahn said.

The amount of income that needs to be replaced in retirement averages between 70% to 80%, but for lower income households it can be almost 100%, she said.

The guide outlines the savings rates needed at various life stages to provide a comfortable retirement. Spending needs do not remain steady over the length of retirement, declining as people age and become less active, but then going up again as healthcare costs increase, Carson said.

Another possible variable is when Roth IRAs, traditional IRAs and 401(k) plans are mixed for tax purposes in retirement years. Overreliance on tax-advantaged savings plans may not be wise if it puts too much of a tax burden on retirees, Carson said.

In addition, younger people should consider how much of their incomes Social Security will replace by the time they retire and how much Medicare costs may go up for higher-income individuals, she added.

Aligning retirement income and assets based on how they will be used to support an individual’s retirement lifestyle is one way to ensure a higher degree of confidence through retirement, J.P. Morgan Asset Management said. “Known as ‘guarantee the floor,’ our analysis shows how stable spending can be aligned with relatively safe or guaranteed funding sources, while variable spending can be covered by retirement income solutions and may require a cash reserve to be available through the year.”