the effect of longevity on your life priorities · neither merrill lynch nor any of its affiliates...

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The Effect of Longevity on Your Life Priorities

Presented by: Cynthia Hutchins, CRPC®, CIMA® Director of Financial Gerontology

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Chartered Retirement Planning Counselor℠ and CRPC® are trademarks or registered service marks of the College for Financial Planning in the United States and/or other countries. CIMA® is a registered service mark of Investment Management Consultants Association, Inc.

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The material presented at this seminar should be regarded as educational information only and is not intended to provide specific advice. Neither Merrill Lynch nor any of its affiliates or financial advisors provide legal, tax, healthcare or accounting advice. You should consult your health care, legal and/or tax advisors before making any financial decisions. All guarantees and benefits of the insurance policy are backed by the claims-paying ability of the issuing insurance company. They are not backed by Merrill Lynch or its affiliates, nor do Merrill Lynch or its affiliates make any representations or guarantees regarding the claims-paying ability of the issuing insurance company. Long-term care insurance coverage contains benefits, exclusions, limitations, eligibility requirements and specific terms and conditions under which the insurance coverage may be continued in force or discontinued. Not all insurance policies and types of coverage may be available in your state. Merrill Lynch makes available products and services offered by Merrill Lynch, Pierce, Fenner & Smith Incorporated (“MLPF&S”), a registered broker-dealer and member SIPC, and other subsidiaries of Bank of America Corporation ("BofA Corp"). Merrill Lynch Life Agency Inc. (MLLA) is a licensed insurance agency and wholly owned subsidiary of BofA Corp. Investment products offered through MLPF&S and insurance and annuity products offered through Merrill Lynch Life Agency Inc.: © 2016 Bank of America Corporation. All rights reserved. | ARQ6FM5D | 02/2017

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Baby Boomers have redefined how we age.

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Just like they redefined fashion.

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And music.

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And how we retire.

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The next phase brings up some questions.

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Evaluate your most important priorities

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Longevity and health

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Health is the big unknown.

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Percent of people 65+ who say the most important ingredients for happiness as they age are:

0.05

0.2

0.36

0.58

0.81

Continually trying new things

Having purpose

Having loving family and friends

Being financially secure

Having good health

Source: Merrill Lynch research study, “Health and Retirement: Planning for the Great Unknown.” May 2014.

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What will your healthcare cost you?

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How illness can affect your financial strategy Illness is the #1 reason people retire earlier than planned1

72% of retirees and pre-retirees said health problems are their #1 concern. 1Source: Merrill Lynch research study, "Americans' Perspectives on New Retirement

Realities and the Longevity Bonus" May 2013

#1

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Healthcare costs are on the rise Healthcare costs more than doubled from 2000 – 2010 when compared to inflation

Healthcare costs increase with age

0.026

0.054

Inflation Healthcare costs

Source: “The Effects of Rising Healthcare Costs on Middle-Class Economic Security.” AARP Public Policy Institute 2013.

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Lifetime out-of-pocket expenses beginning at age 65

114000

247000

458000

Age 80 Age 90 Age 100

Source: EBRI, Savings needed for Medigap premiums, Medicare Part B premiums, and Medicare Part D Expenses for retirement at age 65. Assumes 4% after tax rate of return on investments and a 10% increase in Medigap premium. 2010

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Medicare alone is not enough Medicare covers only 62% of medical expenses associated with healthcare.1

Due to gaps in traditional Medicare, 90% of beneficiaries use supplemental health insurance.2

1. Source: “Setting the Record Straight About Medicare.” AARP Public Policy Institute (2012). 2. Source: “Medicare Chartbook.” Kaiser Family Foundation (2010).

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Understanding long-term care needs and costs

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Likelihood of needing long-term care

By 75 1 in 7 By 85 4 in 7 By 95 5 in 7

Source: www.longtermcare.gov; 2015

http://www.longtermcare.gov/

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My Own Home: The #1 Choice for Long-Term Care

Own Home, 0.85

Assisted Living Facility, 0.1

Family Member Home, 0.04

Nursing Home, 0.01

Retirees’ top preference for receiving long-term care

Base: Age 50+ retirees


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Common signs and symptoms of cognitive decline

• Frequent difficulty in remembering simple things

• Difficulty in following conversations or basic instructions

• Frequent loss of train of thought

• Forgetfulness (appointments and scheduled events)

• May get lost in familiar surroundings or locations

• Impulsiveness Source: Merrill Lynch research study, “Health and Retirement: Planning for the Great Unknown.” May 2014.

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Alzheimer’s: the most worrisome disease of later life

Percent with chronic conditions, by age

54%

26%

10%

6%3%2%

27%

63%

86%

18-44

45-64

65+

1. Source: Ward, B.W. et al. (2014). Multiple Chronic Conditions Among US Adults: A 2012 Update. Preventing Chronic Disease. 11. 2. Source: Merrill Lynch research study, “Health and Retirement: Planning for the Great Unknown.” May 2014.

Alzheimer’s disease/dementia Cancer

Stroke Heart disease Diabetes Arthritis

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Top worries about Alzheimer’s disease

1 Being a burden on my family

2 Losing dignity

3 Being more isolated from friends and family

4 Not being able to do the things I enjoy

5 Health care costs and related expenses


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The Caregiver’s Burden

“Mom refused to go to the doctor, and

when we finally did go, she pretended like

she was fine. But Alzheimer’s was already

changing how she thought and acted.”

“As the disease gets worse, I’ve had to

start organizing more and more of her life.

That means everything from buying her

groceries, to making sure she takes her

medicine, to managing her finances.”

“My retirement plans didn’t account for

becoming a caregiver. The costs are adding

up, and it’s getting harder to concentrate

at work. I need help, but I don’t know

where to get it.”

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Annual median cost of long-term care

$44,479 $41,400

$83,950

$41,184

$30,000

$69,898

Home health aide Assisted living (private room)

Nursing home (private room)

National

Georgia 2

1. Source: National Clearinghouse for Long Term Care Information, U.S. Department of Health and Human Services. Available at www.longtermcare.gov. 2014

2. Source: Genworth. Georgia – State Median: Annual Care Costs in 2014. Available at: https://www.genworth.com/corporate/about-genworth/industry-expertise/cost-of-care.html

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http://www.longtermcare.gov/

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Retirement can be a family affair

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Make your finances work harder to support your family as you age

60% Say they would retire later to pay for things like others’ long-term care

Merrill Lynch Research Study: “Family & Retirement: The Elephant in the Room” Nov 2013

29 Merrill Lynch Research Study: “Family & Retirement: The Elephant in the Room” Nov 2013

35 36 38

25

48%

11%

11%

45%

Contentious

Boring

Loving

Fulfilling

33% Fun

Percent of retirees who say their marriage has become more…

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The family bank

62% provided financial assistance to family

88% have not factored into their retirement plans


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What does it mean to be a good grandparent?

Base: grandparents age 50+

7%

39%

Respecting grandkids’ boundaries

Having fun together

21%

36% Not interfering with parents

17%

15%

Not overindulging grandchildren

12%

44%

Embracing new technology

Teaching and passing on family values

Maintaining one’s health

Planning regular visits

Staying current with today’s trends 2%


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Helping family now or later

Half of pre-retirees would make major sacrifices to help family that could impact their retirement Merrill Lynch Research Study: “Family & Retirement: The Elephant in the Room” Nov 2013

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Work: Retirement can be a time of reinvention

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Myth #1: Aging means the end of work

Reality: More than 7 in 10 pre-retirees say they want to work in retirement, and in the near future, it will be increasingly unusual for retirees not to work.

Nearly half (47%) of today’s retirees say they either have worked or plan to work during their retirement years

-1,897

399

-3,590

-2,111

6,757

Age 16-24

Age 25-34

Age 35-44

Age 45-54

Over Age 55

Change in number of workers by age (in thousands), 2007-2014

Source: Bureau of Labor Statistics, 2007Q1 to 2014Q1

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Myth #2: Aging is a time of decline

Reality: A new generation of working retirees is pioneering a more engaged and active retirement – the New Retirement Workscape – which is comprised of four distinct phases.

Source: U.S. Department of Health and Human Services, 2013.

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Myth #3: Top reasons to continue to work is for money

Reality: There are 4 types of working retirees and many are motivated to work by important non-financial reasons.

Today’s working retirees are twice as likely to say “staying mentally active” is the reason they work rather than “the money.”

Base: Age 50+ Source: U.S. Department of Health and Human Services, 2013.

51%

51%

43%

34%

32%

28%

28%

62%

31%

46%

11%

42%

36%

30%

To stay mentally active

The money

To stay physically active

Health insurance benefits

Social connections

Sense of identity/self-worth

To have new challenges

Top reasons to work in retirement

Pre-retirees Retirees

“If you don’t work, you shorten your lifespan; you get old faster.” – Focus Group Participant

37 37

You’re ready to shape life on your terms Americans over 50 start

The number of companies as 20-somethings

2X Merrill Lynch Research Study: Work in retirement: Myths and Motivations study, 2014

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Proactive planning and discussion

Consider potential startup costs of a new career

Relocate with an eye toward your work life

Rethink when you take Social Security

Take a close look at your insurance needs

Merrill Lynch Research Study: Work in retirement: Myths and Motivations study, 2014

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Finances in Retirement: New Challenges, New Solutions

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51%

38%

31%

Being a burden on my family

Ending up in a nursing home

Being lonely Running out of money to live comfortably

Base: Generation X (age 37-48), Boomers (age 49-67), Silent Generation (age 68-88)

Greatest worry about living a long life

16%

21%

26%

13% 10%

7% 11%

24%

31%

Gen X

Boomers

Silent Generation

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If either my spouse or I am forced to retire early

because of a health problem

If my spouse dies

If a loved one needs extended long-term care

Base: age 50+, married; top two box

If everything goes as I expect

35 36 38

25

29%

12%

16% 31%

18%

14%

11%

9%

Discussed key financial topics with my spouse

Have not discussed key financial topics with my spouse

43%

24%

Percent saying they are prepared for retirement Among those who discuss/don’t discuss financial topics with spouse

If an adult child moves back in and needs support

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Top barriers to having proactive discussions on important financial issues

36 38 24%

11%

10%

19%

Don’t know how to start the conversation

Don’t want family to know how much money I have

Too uncomfortable to discuss

Avoid family conflict

13% Family members don’t want

me to know how much money they have

17% Don’t think it will help

Base: age 50+

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Adult children (age 21+)

Grand-children

Parents/ in-laws

Siblings Other relatives

26%

16% 13% 14%

68%

Percentage who provided financial support

to family members in the last five years

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Reasons why a family member is turned to for financial support

35 36 38

25

44%

11%

7%

41%

Does not have children

The eldest

Has the most money

The most financially responsible

15% Lives nearby

37% Easiest to approach

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56%

77%

Percent who do not feel financially prepared for

retirement

Percent who feel financially prepared for

retirement

Percent of retirees who say retirement is more fun, enjoyable,

and pleasurable.

Base: Age 50+ retirees

* Merrill Lynch / Age Wave Study: Leisure in Retirement: Beyond the Bucket List, May 2016

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Women and life defining priorities

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Women have longer life spans than men

Source: Social Security Administration 2016: http://www.ssa.gov/planners/lifeexpectancy.html.

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Retirement security for women more elusive than for men

Source: Institute for Women’s Policy Research, “The Importance of Social Security in the Incomes of Older Americans Differences by Gender, Age, Race/Ethnicity, and Marital Status” August 2013. Based on 2012 Current Population Survey Annual Social and Economic (ASEC) Survey.

49 For Broker Dealer Use Only – Not For Distribution to the General Public

Claiming at age 70

instead of age 62 can

raise lifetime monthly

benefits by 76%.

Source: GWIM CIO Retirement Strategies calculations based on Social Security Administration data available at <http://www.socialsecurity.gov/OACT/quickcalc/ early_late.html#drcTable>, accessed February 2015.

18000 19200

20800 22400

24000 25920

27840 29760

31680

62 63 64 65 66 67 68 69 70

$0

$5,000

$10,000

$15,000

$20,000

$25,000

$30,000

$35,000

Claiming age

An

nu

al

be

ne

fit

Trade-off between claiming age and annual benefits

Bolster Social Security

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Women are more likely than men to take the off-ramp to assist with

caregiving needs.

Caregivers

Source: AARP Public Policy Institute and National Alliance for Caregiving. “Caregiving in the U.S.,” June 2015, http://www.aarp.org/content/dam/aarp/ppi/2015/caregiving-in-the-united-states-2015-report-revised.pdf

The estimated percentage of caregivers that are female

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Carefully consider when to retire.

When to claim Social Security is

another very important decision

for many families. Claiming

decisions affect survivors’ benefits

as well as benefits at the time

claimed.

Long-term care insurance is

particularly important for women.

What to consider as you near retirement:

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Women and Life-Defining Financial Decision Series

• New series of briefs addressing financial decisions throughout a woman’s life that affect her financial security

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Thank You

the effect of longevity on your life priorities · neither merrill lynch nor any of its affiliates...

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