NEW YORK, June 3, 2020 /PRNewswire/ -- Employee Benefit Research Institute (EBRI) and J.P. Morgan Asset Management today announced a significant new research collaboration leveraging 22 million Chase households and 27 million 401(k) plan participant records, offering the first truly holistic view of how U.S. households spend and save.
In a first for the industry, EBRI will work with J.P. Morgan Asset Management to extract detailed insights into people's behaviors around spending and saving to help policymakers, plan sponsors and plan providers improve retirement outcomes, utilizing their various databases.
"EBRI has been analyzing 401(k) participant behavior for decades based on the EBRI/ICI Participant-Directed Retirement Plan Data Collection database. This new collaboration with J.P. Morgan takes this analysis to another level as we can now gain insight into both the spending and the saving sides of the equation to better understand people's full financial picture," says Lori Lucas, President and CEO of EBRI. "This first report will be one of just a series of analyses that will allow us to help policymakers, plan sponsors, and providers gain better insight into the financial lives of American workers."
"This collaboration is a significant milestone for the retirement industry, harnessing Chase's relationship with nearly half of American households and EBRI's strong pedigree in the employee benefit space," said Katherine Roy, Chief Retirement Strategist, J.P. Morgan Asset Management.
"This research will not only allow us to leverage savings data across a significant swath of plan participants, but we can now overlay with insights into spending behaviors to provide a truly holistic view of how individuals are preparing for retirement."
"We recognize that while we are currently living in unprecedented times, it is our hope that the insights that come out of this collaboration will help strengthen the U.S. retirement system for the longer term and enable more Americans to comfortably reach the retirement finish line," concluded Roy.
EBRI and J.P Morgan Asset Management have today also released their inaugural joint research report, asking: How are some people able to save more than others, even when they have similar salaries?
The research finds that, despite having similar salaries, the middle 50% of the research population1 save about 3% more of their salary at all ages than the bottom 25% of savers. This 3% difference in savings behavior, if sustained over time, could ultimately explain some of the meaningful gap between the current retirement plan account balances of middle and low savers. The study also suggests that for most households, a 401(k) appears to be their primary retirement savings vehicle, underscoring the importance of the employers' role in savings.
1)Middle savers save about 3% more of their salary at all ages than low savers despite having similar salaries 2 (See Exhibit 1)
2)In their 401(k) with their current employer, low savers only reach 1x their salary by age 60, compared to middle savers that reach 2x their salary 2 (See Exhibit 2)
3)Low savers spend about 2% to 3% more of their salary than middle savers up to age 45 3 (See Exhibit 3)
4)Low savers spend more on housing, transportation, food and beverage – less on travel 3(See Exhibit 4a, 4b)
Methodology
Using 2016 data, we compare information about 22 million Chase households and the records for 27 million 401k(k) plan participants to isolate an overlapping population of 1.4 million households. We remove households with:
De minimis employer plan balances4
Total spending less than 50% of salary
Likely more than one earner5
Examining the resulting population of 10,000 households, we look at behaviors by age cohort to try and find the missing links among salary, employee spending, savings and 401(k) balance. Any employer match is not included in our analysis.
We note two caveats. First, our research is a snapshot in time; we examine individual households' concurrent financial picture instead of their behavioral trends over the years. Second, we use fairly broad definitions of spending categories. For example, the food and beverage category does not distinguish between spending subcategories such as eating at restaurants vs. eating at home. More granular analysis of the data will inform future reports.
Commitment to Privacy and Security
JPMorgan Chase has adopted rigorous security protocols and checks and balances to ensure all customer data are kept confidential and secure. Strict protocols are informed by statistical standards employed by government agencies. Additionally, the firm's work with technology, data privacy, and security experts will help maintain industry leading standards.
Before J.P. Morgan Asset Management receives any Chase data, all unique identifiable information – including names, account numbers, addresses, dates of birth, and social security numbers – is removed. JPMorgan Chase also has put in place privacy protocols for its researchers and only allows aggregated data to be published.
No EBRI data was transferred to JPMorgan Chase, and the data privacy of participants and contractual relationships with recordkeepers have been carefully protected. EBRI has no access to personally identifiable information.
About EBRI
The Employee Benefit Research Institute (EBRI) was founded in 1978. Its mission is to contribute to, to encourage, and to enhance the development of sound employee benefit programs and sound public policy through objective research and education. EBRI is the only private, nonprofit, nonpartisan, Washington, DC-based organization committed exclusively to public policy research and education on economic security and employee benefit issues.
EBRI's membership includes a cross-section of pension funds; businesses; trade associations; labor unions; health care providers and insurers; government organizations; and service firms. The 401(k) universe is a joint collaboration between EBRI and the Investment Company Institute.
This research paper was produced through a collaboration between J.P. Morgan Asset Management and the Employee Benefit Research Institute (EBRI), a Washington, D.C.-based organization committed exclusively to public policy research and education on economic security and employee benefit issues.
In an ongoing collaborative effort, the Employee Benefit Research Institute (EBRI) and the Investment Company Institute (ICI) maintain the EBRI/ICI Participant-Directed Retirement Plan Data Collection Project, which is the largest, most representative repository of information about individual 401(k) plan participant accounts. ICI is the leading association representing regulated funds globally, including mutual funds, exchange-traded funds (ETFs), closed-end funds, and unit investment trusts (UITs) in the United States, and similar funds offered to investors in jurisdictions worldwide. While this paper uses data from the EBRI/ICI database, ICI did not participate in the research collaboration between EBRI and JPMAM and was not involved in the writing of this paper.
About J.P. Morgan Asset Management
J.P. Morgan Asset Management, with assets under management of USD 1.9 trillion (as of 31 March 2020), is a global leader in investment management. J.P. Morgan Asset Management's clients include institutions, retail investors and high net worth individuals in every major market throughout the world. J.P. Morgan Asset Management offers global investment management in equities, fixed income, real estate, hedge funds, private equity and liquidity. JPMorgan Chase & Co. (NYSE: JPM) is a leading global financial services firm with assets of USD 2.7 trillion (as of 31 December 2019) and operations worldwide. Information about JPMorgan Chase & Co. is available at www.jpmorganchase.com.
J.P. Morgan Asset Management is the marketing name for the asset management businesses of JPMorgan Chase & Co. and its affiliates worldwide.
This document is a general communication being provided for informational purposes only. It is educational in nature and not designed to be taken as advice or a recommendation for any specific investment product, strategy, plan feature or other purpose 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 examples used are generic, hypothetical and for illustration purposes only. 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. In addition, users should make an independent assessment of the legal, regulatory, tax, credit, and accounting implications and determine, together with their own professional advisers, if any investment mentioned herein is believed to be suitable to their personal goals. Investors should ensure that they obtain all available relevant information before making any investment. 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 production, but no warranty of accuracy is given and no liability in respect of any error or omission is accepted. It should be noted that investment involves risks, the value of investments and the income from them may fluctuate in accordance with market conditions and taxation agreements and investors may not get back the full amount invested. Both past performance and yields are not reliable indicators of current and future results.
DATA PRIVACY: We have a number of security protocols in place which are designed to ensure all customer data are kept confidential and secure. We use reasonable physical, electronic, and procedural safeguards that are designed to comply with federal standards to protect and limit access to personal information. There are several key controls and policies in place which are designed to ensure customer data are safe, secure and anonymous: (1) Before J.P. Morgan Asset Management (JPMAM) receives the data, all selected data is highly aggregated and all unique identifiable information, including names, account numbers, addresses, dates of birth and Social Security numbers, is removed. (2) JPMAM has put privacy protocols for its researchers in place. Researchers are obligated to use the data solely for approved research and are obligated not to re-identify any individual represented in the data. (3) JPMAM does not allow the publication of any information about an individual or entity. Any data point included in any publication based on customer data may only reflect aggregate information. (4) The data are stored on a secure server and can be accessed only under strict security procedures. Researchers are not permitted to export the data outside of J.P. Morgan Chase's (JPMC) systems. The system complies with all JPMC Information Technology Risk Management requirements for the monitoring and security of data. (5) JPMAM provides valuable insights to policymakers, businesses and financial professionals, but these insights cannot come at the expense of consumer privacy. We take every precaution to ensure the confidence and security of our account holders' private information.
1 Based on employee contribution rates by age cohort.
2 Source: 2016 anonymized EBRI, EBRI/ICI Participant-Directed Retirement Plan Data Collection and JPMorgan Chase data. A population of 22 million Chase households and 27 million 401(k) plan participant records were isolated to identify an overlapping population of 1.4 million households. Households with employer plan balances of $100 or less, total spending less than 50% of salary or likelihood of more than one earner were removed to ensure a complete picture of saving/spending.
3 Source: 2016 anonymized EBRI, EBRI/ICI Participant-Directed Retirement Plan Data Collection and JPMorgan Chase data. A population of 22 million Chase households and 27 million 401(k) plan participant records were isolated to identify an overlapping population of 1.4 million households. Households with employer plan balances of $100 or less, total spending less than 50% of salary or likelihood of more than one earner were removed to ensure a complete picture of saving/spending. Select Chase credit and debit card, electronic payment, ATM withdrawal and check transactions from January 1 to December 31, 2016. Outliers in each asset group were excluded (0.1% of top spenders in each spending category). Information that would have allowed identification of specific customers was removed prior to the analysis.
4 De minimis is defined as an account balance with $100 or less, most likely the result of an inactive participant.
5 The initial matching was based on the primary household member only and did not include other members in the household who may receive income, contribute to spending and may or may not have access to an employer plan. For this reason, this analysis is limited to single-earning households only.
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