Bank of America Research on Aging and Longevity. August 2015

Transcription

1 Bank of America Research on Aging and Longevity August 2015

2 Disclosures Bank of America Merrill Lynch is a marketing name for the Retirement Services business of Bank of America Corporation ( BAC ). Banking activities may be performed by wholly owned banking affiliates of BAC, including Bank of America, N.A., member FDIC. Brokerage activities may be performed by wholly owned brokerage affiliates of BAC, 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 Certain associates are registered representatives with MLPF&S and may assist you with investment products and services. Unless otherwise noted, all trademarks and registered trademarks are the property of Bank of America Corporation Bank of America Corporation. All rights reserved. ARBK6GH6/DX4C4I 2

3 Source: The Atlantic, October 2014 Issue 3

4 Health Care Improvements Keep Lowering the Death Rate Source: Age Wave, 2014 Timeline 4

5 Increased Longevity Is a Recent, Major Demographic Shift The Last Two Centuries Have Seen a Doubling of the Average Lifespan Which Is an Exponential Change in the Context of Overall Human Experience Years Years ? ,000 BC 50,000 BC 2000 AD Source: U.S. Census Bureau,

6 Aging Population Is A Global Phenomenon Percent of Population Age 65+ in 2010 Percent of Population Age 65+ in 2050 Less than 5% 5% to 10% 10% to 15% 15% to 20% Greater than 20% No Data Source: Nehal, Sarbjit and Beijia Ma, "The Silver Dollar - Longevity Revolution," Merrill Lynch Global Research, June 2014, p.3 6

7 Under Aging Baby Boomers Supercharge the Longevity Revolution Change in U.S. Population Growth Under % 20% 49% 11% -2% 17% 27% % -13% 16% 47% 11% -3% 22% % 7% -8% 20% 49% 15% 12% % 54% 7% 8% 7% -10% 3% Source: US Census Bureau, 2010 Under

8 Longevity and Aging Boomers are Reshaping American Society Population by Age and Sex, 1970 Population by Age and Sex, 2030 Source: Dychtwald, Ken, "How the AGE WAVE will Transform the Marketplace, the Workplace, and Our Lives," Age Wave, April 2014, pp. 50,

9 Retirement is Being Redefined and Transforming the World From To re tire ment (noun) riˈtīrmənt : The action or fact of leaving one's job and ceasing to work : To disappear, to go away, to withdraw Source: Webster's New Twentieth Century Dictionary, published

10 Work Has Become an Essential Idea of Retirement Ideal Plan to Balance Work in Retirement for Pre-Retirees Majority of Retirees Choose to Work, Across Wealth Levels Which one of the following represents your ideal plan for how you would like to balance work and leisure in retirement? I work in retirement because I want to I work in retirement because I have to 5% Full-time work 96% 72% of preretirees want to work in some form during retirement 33% 35% Cycle between work and leisure Part-time work 62% 38% 82% 18% 28% Never work for pay again Under $50K $100K to under $250K 4% $1M to under $5M Source: Merrill Lynch/Age Wave New Retirement Wildcards Survey, 2013, General Population Pre-Retirees Aged 50+ and Working Retirees Aged

11 Longevity Bonus is Driving a Re-Imagination of Lifecourse Alternating Work, Family, Education and Leisure Time Traditional Lifecourse Education Work and family Leisure Longevity bonus Gap year Modern Lifecourse (illustrative) Sabbatical Traveling Getting new degree Age Grad school Retraining for second career Consulting and volunteerism Education Leisure Work and family Source: Dychtwald, Ken, "How the AGE WAVE will Transform the Marketplace, the Workplace, and Our Lives," Age Wave, April 2014, pp. 50, Age 11

12 Changing Family Dynamics Pose New Social and Financial Challenges for Boomers Family Then Multi-generational family poses challenges Family Now 3 out of 5 people age 50+ today provide financial support to their parents and their adult children Many boomers become the Family Bank Family support is unforeseen and unprepared 88% of age 50+ have never budgeted for financial support to family members 83% of age 50+ feel financially responsible for their parents There is a dangerous lack of communication around financial planning in retirement for elderly parents 70% of boomers haven t discussed with their parents where they live in retirement or how they pay for long-term care Source: Age Wave Study: Family 12

13 Women in Particular Are Affected By Longevity Expect to Live Longer than Men and Worry About Running Out of Money % Expecting to Live to Age 90 Number of US Widowers and Widows (millions) 2x 39% % 4x 2.6 Men Women Men (Widower) Women (Widow) Women are expecting to live longer and are more likely than men to worry about running out of money and being a burden to their families 4 out of 5 women will outlive their spouses 800,000 new widows every year Source: MetLife Study of Women, Retirement, and the Extra-Long Life, Implications for Planning, September 2011, p.3 ; 65+ in the United States: 2010 US Census Bureau, p

14 A Massive Silver Economy is Emerging Globally Worth an Estimated $7T According to BAML Research Healthcare 75+ year olds spend over 200% more on health care than the population average Financial services 20%+ expected increase in financial advisors Consumer goods Boomers dominate 94% of consumer packaged good categories Pharma Average American aged receives 27 prescriptions per person/ year Housing Average national rent for skilled nursing facilities is $8,000/month Source: Ma, Beijia, "The Silver Dollar - Longevity Revolution," September 2014, p.13 14

15 It Is Challenging to Secure Retirement Income Defined Benefit Plans Are Going Away Percentage of Participants in DB and DC Plans 68% 66% 60% Population age 65+ (million) While Social Security Burden Is Growing Exponentially year CAGR % 50% 50% 40% Workers to recipients ratio 42 to to 1 N/A 34% 32% Social Security recipients 22,488 54,031, % Average annual Social Security payout $220 $12, % Defined Benefit Defined Contribution Total Social Security payout (M) % Federal budget for Social Security $49 $696, % 0.04% 19% 10.8% Source: US Department of Labor Employee Benefits Security Administration, Private Pension Plan Bulletin Historical Tables and Graphs, Dec 2014, Table E5: Number of Participants in Pension Plans by type of plan, ; Dychtwald, Ken, "How the AGE WAVE will Transform the Marketplace, the Workplace, and Our Lives," Age Wave, April 2014, p.21 15

16 Healthcare Issues and Expenses Are the Retirement Wild Card Costs of Alzheimer s Are Expected To Explode $1,200B Long Term Care Need and Cost Are Major Concern % of Population 65+ yr Expecting To Need Long Term Care $214B ~6x 30% Won t Need LTC 70% Will Need LTC Currently, 5.2M Americans affected by Alzheimer s, which without a break-through cure is expected to rise to 14M by 2050 Among top 10 causes of death in US, Alzheimer s is currently the only one that cannot be prevented, cured or even slowed Couples retiring at 65 will face average of $ ,000 in health care costs during retirement Source: Alzheimer's Association, 2014 Alzheimer's Disease Facts and Figures, Alzheimer's & Dementia, Volume 10, Issue 2, p.54.; Longtermcare.gov; Hebert LE, Weuve J, Scherr PA, Evans DA, Alzheimer disease in the United States ( ) estimated using the 2010 Census. Neurology 2013;80(19): ; Center for Disease Control and Prevention, Alzheimer's Disease, July 2014 ; Alzheimer's Association, "Help Wipe Out Alzheimer's: Share the Facts," 2014; Fidelity Viewpoints, "Retiree health costs hold steady," June 2014; Ameriprise Financial, "4 Strategies to help you save enough for health care in retirement,"

17 Longevity Revolution Impact Across BAC Client Groups People Require help with securing sufficient retirement income streams and hedging increased longevity risk Prepare for increased and unpredictable health care costs Aspire to living their best life in retirement Concerned that employees are under-prepared for retirement Companies Seek talent opportunities with an aging labor pool Struggle with Defined Benefits funding risks as they transition to Defined Contribution retirement plans Adapt to changing customer demographics and utilize opportunities created by the $7T Silver Economy Institutional Investors Create longevity and mortality risk management products Develop new set of retirement / lifetime income products 17

18 Distilled Client Insights into an Innovative Framework and Driving it Through Channels Listened to Clients Main Retirement Concerns in Consumer Research and Distilled What We Heard into an Innovative Framework 18