Planning for the Great Unknown: The New Reality of Health Care in Retirement

Transcription

1 Planning for the Great Unknown: The New Reality of Health Care in Retirement 1

2 Disclosures Neither Bank of America nor any of its affiliates provide legal, tax nor accounting advice. You should consult your legal and/or tax advisors before making any financial decisions. WEX Health is not an affiliate of Bank of America Corporation. This material should be regarded as educational information on health care considerations and is not intended to provide specific health care advice. If you have questions regarding your particular situation, please contact your health care, legal or tax advisor. Bank of America Merrill Lynch is a marketing name for the Retirement Business of Bank of America Corporation ( BofA Corp. ). Banking activities may be performed by wholly owned banking affiliates of BofA Corp., including Bank of America, N.A., member FDIC. Brokerage services may be performed by wholly owned brokerage affiliates of BofA Corp., including Merrill Lynch, Pierce, Fenner & Smith Incorporated ( MLPF&S ), a registered broker-dealer and member SIPC. Investment products: Are Not FDIC Insured Are Not Bank Guaranteed May Lose Value Bank of America Merrill Lynch makes available investment products sponsored, managed, distributed or provided by companies that are affiliates of BofA Corp. or in which BofA Corp. has a substantial economic interest Bank of America Corporation. All rights reserved. ARLKCSHS 2

3 Moderator: Danovan Clacken Director of Strategy & Initiatives, Bank of America Merrill Lynch Panelists: Jason Cook Vice President of Healthcare Emerging Markets, WEX Health Cynthia Hutchins Director of Financial Gerontology, Bank of America Merrill Lynch Trisha Szto Supervisor of Global Benefits & Wellness, Western Asset Management Company 3

4 Health is the great unknown. 4 4

5 How illness can affect your financial strategy #1 Illness is the #1 reason people retire earlier than planned 1 72% of retirees and pre-retirees said health problems are their #1 concern. 1. Source: Merrill Lynch research study, "Americans' Perspectives on New Retirement Realities and the Longevity Bonus" May 2013 Source: Merrill Lynch / Age Wave study: Americans Perspectives on New Retirement Realities and the Longevity Bonus, May

6 Medicare alone is not enough Medicare covers only 60% of medical expenses associated with healthcare. 1 Due to gaps in traditional Medicare, 90% of beneficiaries use supplemental health insurance Source: EBRI Notes, October, 2012, Vol 33, No Source: Medicare Chartbook. Kaiser Family Foundation (2010). 6 6

7 Healthcare costs are on the rise 5.4% 2.6% Inflation Healthcare costs Healthcare costs more than doubled from when compared to inflation Healthcare costs increase with age Source: The Effects of Rising Healthcare Costs on Middle-Class Economic Security. AARP Public Policy Institute

8 Lifetime out-of-pocket expenses most retirees will need $458,000 $247,000 $114,000 Age 80 Age 90 Age 100 Source: EBRI Notes, October, 2012, Vol 33, No.10. 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. Nominal, after-tax rates of return were assumed to follow a log-normal distribution with a mean of and a standard deviation of This provided a median nominal annual return of 7.32 percent. Cost of investing not included. 8 8

9 Discussion 9

10 Testimonial 10

11 Client Testimonial Western Asset Management Average total HSA assets by year account opened Average 2017 HSA contribution utilization $7,298 WAM BofAML Large Employers Industry 1 45% WAM 55% $4,320 $2,662 $2,229 $2,127 $1,619 $1,815 $1,434 $817 66% 34% BofAML Large Employers Saved Spent 1. Source: 2017 Year-End Devenir HSA market Research Report 11

12 Client Testimonial Western Asset Management Percentage of accountholders investing 4% Percentage of total HSA assets invested 18% Industry 1 1 Industry 96% 82% 21% 36% 79% WAM 64% WAM % Investing % Not Investing % of Total Assets Invested % of Total Assets Not Invested 1. Source: 2017 Year-End Devenir HSA market Research Report 12

13 Questions? 13

14 Thank You! 14