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BIG CHANGES IN HEALTHCARE – WILL THEY CHANGE YOUR FINANCIAL LIFE?


EXPERTS ANSWER KEY QUESTIONS TO HELP YOU PREPARE FOR RISING COSTS AND OTHER
GAME-CHANGING INNOVATIONS TRANSFORMING THE NATION’S HEALTHCARE SYSTEM.


 * Hear how the pandemic, innovation and policy are reshaping healthcare
 * Learn about ways to factor healthcare costs into your retirement and legacy
   planning, and why it’s essential to your long-term financial security
 * Take away actionable ideas you could consider at any age in preparing for
   caregiving, long-term care and other future healthcare needs

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[PROGRAM OPEN WITH TEXT OVER MONTAGE OF VIDEO CLIPS]

 

Medical breakthroughs

 

Rising costs

 

Investment opportunities 

 

Caregiving needs

 

Preparing for longer lifespans …

 

… and health spans

 

Big changes in healthcare — will they change your financial life?

 

 

Please see important information at the end of this program.  Recorded on
09/09/2021.

[LOWER 3rd]

Lorna Sabbia

Head of Retirement & Personal Wealth Solutions 

Bank of America

Lorna Sabbia:         

Hello, everyone. I’m Lorna Sabbia, and thanks for joining me for this
conversation about healthcare. 

Even before the pandemic, our health and well-being were a top priority for
people of all ages, and the events of the past year and a half have made it an
even greater focus for many of us. 

On one hand, there are good reasons for optimism. 

Life expectancy in the U.S. over the past several decades has been steadily
rising, and new innovations and medical advances are dramatically improving our
quality of life. 

On the other hand, longer life, high-tech treatments, rising insurance premiums,
and out-of-pocket expenses are greatly increasing the cost of care, and that has
many of us wondering how we’ll pay for it all.

[GRAPHIC CARD]

60% of those worried about retirement income 

cited future healthcare costs as a key concern. 

(Source: Alliance for Lifetime Income, 

“Retirement Reset Tracker Survey,” May 2020)

 

In a recent survey, 60% of respondents who are worried about their income in
retirement cited future healthcare cost as a key concern. 

In this program, we’ll look at the many changes transforming the healthcare
landscape and what that could mean for you. 

A bit later, I’ll speak with two experts from Bank of America about some of the
most common questions we’re hearing from people on planning and saving for
healthcare at any age. And we’ll offer insights and ideas you could put to work
today to help you pursue greater financial wellness.

But first, I’m really pleased to be joined by Dr. Laura Carstensen, a renowned
psychologist, author and the founding director of Stanford University’s Center
on Longevity. 

Laura, thanks so much for joining me for this conversation.

Laura Carstensen:

Thanks for having me. It’s a pleasure to be with you today.

Lorna Sabbia:         

I want to start with a look at the Center on Longevity’s initiative called A New
Map of Life. It draws some powerful conclusions about the overall state of our
health. 

[GRAPHIC CARD]

Image on screen: Stanford Center on Longevity A New Map of Life™ homepage fades
in onscreen

Source: https://longevity.stanford.edu/a-new-map-of-life/

Tell us what you’re finding about how our views of health and wellness, both
physical and emotional, are changing and what role has the pandemic actually
played?

[LOWER 3rd]

Laura Carstensen, Ph.D.

Professor of Psychology Stanford University 

Director, Stanford Center on Longevity

Laura Carstensen:

The analysis that we have done in the New Map of Life™ is one where we’re
concluding that the angst that so many of us feel about aging -- at an
individual level, at a policy level, concerns about others, our parents, our
loved ones -- that this discomfort is really reflecting a mismatch between the
culture that guides us through life and the length of the lives that we’re
leading. 

 

[LOWER 3rd]

The New Map of Life™ initiative is helping redefine   

the way we live – from early to very late in life.

We need to change the way we live and we need to make changes from early in life
to very late in life and the New Map of Life initiative has set out to draw that
map.

If there is a silver lining in something as horrific as a pandemic, it’s that
crises can sort of remove us from the routines that we’ve been living in our
lives that are so familiar and let us take a look at what that’s like from a
distance perspective. 

So I think there were multiple disruptions and we’re going to see if maybe that
makes it a perfect time to rewrite the script.

 

Lorna Sabbia:         

I would like to look at what you’re finding about the connection between our
health and our financial wellness, and does that connection only apply to
individuals that are near or in retirement from your perspective?

Laura Carstensen:

One of things that the New Map of Life is concluding again and again and again
is that this is a life course issue. One of the challenges or I think the
concerns that people have had earlier in planning is that we started to think
about retirement and our health and later life when we were in our late 50s,
when it was just around the corner. 

But of course, the health that you enjoy or suffer from in your later years for
most of us these days has its roots much earlier in life.  Chronic diseases,
nutrition, obesity, arthritis, heart disease; these are the conditions that are
threatening life in old age and they start much, much, much earlier.

[GRAPHIC CARD]

A New Map of Life™

 

·      Exploring ways to make 

green spaces more available

(Source: The Stanford Center on Longevity)

 

And so on the New Map of Life, we’re thinking about ways to make, say, green
spaces more available for all people, not just those who live in affluent
neighborhoods, so that people can walk more, can engage more in their
communities. 

[GRAPHIC CARD]

A New Map of Life™

 

·      Exploring ways to make 

green spaces more available

·      Finding ways to build social 

connections throughout life

(Source: The Stanford Center on Longevity)

 

We’re seeing that social connections have a great bearing on our physical
health, so how do we build them early in life and then maintain them throughout
life? 

So we’re really looking at the intersections which are numerous across different
domains and all of them end up affecting our financial wellness.

Lorna Sabbia:         

Would you say the events of the past year and a half have made planning for
healthcare costs early on -- you’re sort of touching on that -- more important
now than ever?

Laura Carstensen:

I think it’s finally beginning to dawn on us that only treating diseases once
they happen is not the best way to deliver good health to a population. 

Again, let me just link good health to financial wellness. I don’t have to tell
you, Lorna, that those are intricately linked, right. If you’re healthy, you can
work more, you can work longer, you can engage more and so people who are
healthy are going to be more financially secure. So yes, we see those
connections and how they have been changing.

[LOWER 3rd]

Emotional well-being, physical fitness and 

financial security are all interconnected.

We’ve come to think that emotional well-being, physical fitness and financial
security are three legs of a stool and if anyone is missing, we’re in
trouble.  But if we can shore up those domains of life - and we can - then we
would be able to create a world where the majority of people arrive at old age
mentally sharp, physically fit and financially secure.

Lorna Sabbia:

Excellent. You’re really talking about disruption and so disruptive times often
lead to remarkable innovations and we see many; from vaccines obviously
delivered at record speed to hospitals converting to tele-health literally
almost overnight. 

What other game changing breakthroughs are you seeing and what could they mean
for our overall health and quality of life?

Laura Carstensen:

In my view, among the most exciting areas of science writ large is Geroscience. 

[LOWER 3rd]

Geroscience studies the processes that put us  

at risk for different diseases as we grow older.

It’s the science of aging itself, the study of the processes that occur as we
grow older that put us at risk for all sorts of diseases. Scientists are making
real gains in understanding ways we might be able to slow the biological changes
that occur as we age that put us at risk for all diseases. To the extent that we
can achieve that, we can remain healthier, stronger, fitter for many, many more
years of our lives.

Lorna Sabbia:         

I want to switch gears and talk about caregivers and obviously, they often face
a unique set of financial and emotional challenges for sure. How do you feel
their roles and situations have been changing?

Laura Carstensen:

I like to think of these issues in historical context, kind of zooming out. A
century ago, most people were sick for about two weeks before they died. We were
dying from different kinds of diseases. We would get a gastrointestinal disease
from some food contamination or something, or catch the flu and be dead in a
couple of weeks. So caregiving was not something that most people experienced
for decades. That has changed.

Today, most of us, thankfully, are living longer and are able to live even with
chronic diseases. What that means, however, is that people often need assistance
for much longer than we did in the past. 

Today, we can be healthy, not so healthy and still survive for years. And so the
biggest change for caregivers is really the length of time that people are
providing care to loved ones who need care.

Lorna Sabbia:         

And I also think about the topic of caregivers providing care for multiples of
folks at the same exact time, and I think the pandemic has been a perfect
example of sort of teasing that out.

Laura, there have been a number of studies ranking the healthcare system in the
United States as low when compared to other developed economies. I’m curious to
know why do you think that is the case and are there policy changes that could
help, such as expanding Medicare or other reforms?

Laura Carstensen:

Yes. The United States compared to other developed nations spends more on
healthcare than basically any other country, so we’re spending an awful lot. Let
me say that the care that we get is absolutely high quality in the United
States. 

So the healthcare providers, the physicians, the treatments are breathtakingly
effective, so that the care we get is actually very good. The cost is not so
good.

The other issue that we’re just beginning to wrestle with, and again, I think
the pandemic reminded us of this, is we’ll do a lot better if we invest in
maintaining our health than treating each disease as it occurs. And so rather
than wait until people are really sick and they need to access the healthcare
system, we need to invest in public health. 

We spend far less on public health preventive efforts than we do on the
treatment of diseases and we really need to flip those around.

If I can say one thing about Medicare, if we were to allow Medicare to be the
primary provider for workers who are older, we would be able to help employers
be incented to retain older workers and it will help our economy greatly and
individuals greatly if people can work longer. 

So to the extent that we can solve some of the health insurance costs in ways
that will allow people to continue to work, then I think we’ll all do better.

Lorna Sabbia:         

That makes sense, absolutely. 

Laura, we often hear about the impressive gains in lifespans, but there’s also a
growing focus on our health spans, or the number of years when we’re productive
and in good physical and cognitive health. 

Would you say we’re making progress there?

Laura Carstensen:

I think we are making progress, but it’s uneven in the population.  For some
subgroups in the population, health span is aligning with lifespan. And in
others, we’re not making enough progress.

[LOWER 3rd]

“Health span” refers to the numbers of years 

that we’re healthy and free from disease.

 

Health span really should be the metric that we use to gauge whether or not
we’re on the right track or the wrong track, not lifespan or life expectancy.  

What’s happening today is that we see health span and lifespan aligning in those
individuals who are living affluent lives.  The highly educated, wealthy
individuals in our country are living healthy lives for most of their lives and
having a relatively short period of time when they’re functionally impaired.  

But that’s not happening for the majority of the population.  And for people
with lower levels of education, with less family wealth, individual wealth,
we’re seeing functional health decline over time gradually from the time people
are in their 30s and 40s. They’re getting less functionally healthy. 

For our nation to thrive, for our economy to thrive, we need to bring everyone
along.  And so we need to think seriously about changes we can make in the
population where all of us benefit from better health.

Lorna Sabbia:         

That makes a lot of sense. I know that we always probably don’t talk about it
enough but we all know that keeping our brain healthy is so important, clearly,
especially as we get older. I’m curious to know what suggestions you may have
for us on that topic, too.

Laura Carstensen:

My best suggestion for cognitive health is actually the same suggestion I would
make for physical health and that is exercise. It’s the best thing we can do to
maintain our health and our function into very advanced ages. 

Take a walk in the mornings, go for a couple miles or one mile or even a half a
mile, and you’ll feel better. Cognitively, you’ll be sharper and physiologically
you’ll be sharper. Our brains are part of our bodies and they benefit from our
overall health. So I think that’s the best recommendation I can give for
cognitive health and physical health.

If I could say one more word about emotion, the best thing you could do for
emotion, too. Emotional health benefits from exercise as well.

Lorna Sabbia:         

It makes sense. You know. I often hear healthy heart, healthy brain, and so I
think you’re getting to that certainly with your exercise comment.

You know, Laura, there’s a wonderful sense of empathy and optimism that comes
through in all of your research on how we can live our best lives at any age.
I’d like to close by asking about what you learned living through the pandemic
and are you hopeful we could emerge from this stronger or at least with the
collective tools and knowledge to create a better path forward?

Laura Carstensen:

What a great question. The emotion I have felt during the pandemic more than any
other emotion has been gratitude. 

You realize I think when in a crisis time what matters most of all, and so I
think a lot of us have come to appreciate more the people, the places, the
resources that we have in our lives and I’m certainly one of many who have
experienced that. 

I must say it comes with a little bit of guilt because so many Americans have
suffered so much that being able to feel like I’m seeing the world as more
precious than I ever saw it before makes me feel even more empathy and concern
for those who haven’t been able to experience the world that way.  

But we live in a beautiful place and when we’re reminded of our mortality, it
makes most of us appreciative.

Lorna Sabbia:         

I think that’s a perfectly inspiring note to end with. Laura, thank you so much
for sharing your insights. You’ve given us a lot of important things to think
about. We really appreciate it.

Laura Carstensen:

Thank you. 

 

Lorna Sabbia:         

Now, we’re going to switch gears and we’re going to dig into some of the
questions clients have told us are most on their minds today and these include
how to plan for rising healthcare costs, questions around Medicare and long-term
care insurance and ways to invest in healthcare innovations. 

Joining me for this part of the program is Joe Curtin, head of Portfolio
Management for our Chief Investment Office for Merrill and Bank of America
Private Bank. 

Amanda Lasher-Ross, Managing Director, heads Personal Retirement and Wealth
Impact Planning for the retirement business at Bank of America. 

So, Amanda and Joe, this program is about the big changes we’re seeing in
healthcare and what they could mean for our financial lives. 

[GRAPHIC CARD]

“How can I plan now for rising healthcare costs so I don’t risk my 

long-term financial security?”

 

One of the most common questions we hear from clients is how they can plan for
and fund rising health and medical costs without jeopardizing their wealth or
long-term financial security and it’s a really important point. 

So how can we think about this concern and how it relates to retirement and are
there steps people could consider at any age?

[LOWER 3rd]

Amanda Lasher-Ross

Managing Director, Retirement & Personal Wealth Solutions 

Bank of America

 

Amanda Lasher-Ross:

Sure, Lorna, I can jump in. One of the big questions that we ask clients to
think about as they approach retirement is how am I going to generate income? 

You spend your entire life accumulating wealth, receiving a paycheck, in most
cases, from an employer and all of a sudden, you switch into retirement and now,
you need to generate your own paycheck for what can sometimes be over 20 years
and that can be an unnatural shift for clients to make. 

So the sooner you can start thinking about developing an income plan, it really
does create a strong foundation for your overall retirement conversation. 

When we think about income, we ask clients to really think about it in three
ways or three buckets. 

[GRAPHIC CARD]

3 “buckets” in your retirement income plan:

·       Your essential expenses

First is what are my essential expenses; what do I need to keep the lights on,
to take the medication that I need? What are the expenses that I have,
literally, month over month that I just cannot do without? 

[GRAPHIC CARD]

3 “buckets” in your retirement income plan:

·       Your essential expenses

·       Your important expenses

·       Your aspirational expenses

Then you can think about other expenses that are important or even aspirational
in a second and third bucket.  

But we really like to double down on the essential expenses conversation and
talk to clients about “how can we create sources of income to cover these
essential expenses?” 

Certainly, things like Social Security; for those folks that have pensions,
those are great guaranteed income sources that clients will leverage in
retirement. 

[LOWER 3rd]

Social Security, pensions and annuities can all go 

toward funding your essential expenses bucket.

But oftentimes, there’s a gap, right? There’s a gap between what I have and what
I need. Looking at solutions like an annuity, for example, is a great way to
think about bridging that gap to make sure that our essential expense bucket is
filled. 

It’s not a one-and-done conversation, right? We need to make sure we’re
revisiting that regularly but starting with the income plan is really the first
step in building that foundational retirement plan that can really help get you
there.

Lorna Sabbia:

 How can someone get started if they haven’t done so or get back on track if
they’ve fallen behind? Are there specific strategies and resources that they
could consider?

Amanda Lasher-Ross:

The important thing to think about is saving, right, accumulation, bringing as
much into the retirement portfolio as possible and how can you take advantage of
tax-efficient vehicles to do that? 

A couple of things to think about are, one, Health Savings Account. If you’re
part of a high deductible plan, you’re eligible for a Health Savings Account. 

What is that, right? It’s a way for you to put away money to spend on healthcare
expenses with really three main tax benefits. 

 

[GRAPHIC CARD]

Health Savings Accounts (HSAs):

·       Eligible if you have a High Deductible Health Plan and meet other tax
law requirements

·       Contributions made through payroll deductions are pre-tax 

·       Any potential growth on investments is tax deferred

·       Distributions are tax free for qualified medical expenses

·       Funds roll over from year to year

You’re putting money in pre-tax. It grows tax deferred and then when you take it
out, it’s tax-free on qualified distributions and it’s not something that you
lose at the end of the year if you don’t use it. You can put money in to save it
for later when your healthcare costs accumulate. 

The other thing to think about is if I’m over the age of 50, am I taking
advantage of what’s called catch-up elections? 

[GRAPHIC CARD]

2021 catch-up contributions for folks 50+

 

For an IRA:

·       An additional $1,000

·       For a total of $7,000

For a 401(k)*:

·       An additional $6,500

·       For a total of $26,000

(Source: Internal Revenue Service)

*Check your employer’s 401(k) plan document to determine if catch-up
contributions are available. 

 

In IRAs, for example, this year, you can put $6,000.00 into an IRA but if you’re
over 50, you get a $1,000.00 in a catch-up election which allows you to put away
$7,000.00. There’s a catch-up for 401(k)s as well. 

So saving in a tax-efficient way is really important at any age and the thing
you want to think about particularly when you’re talking about healthcare
expenses is that healthcare expenses are volatile, right? We know this, like
things that happen in public policy, with technology, with medications can
change healthcare costs pretty dramatically year-over-year. 

So it just makes it all that much more important to think about income, to
assess these expenses and to get your savings happening in the right place so
that you can accumulate as much as you can over time.

Lorna Sabbia:         

Excellent, super helpful. Thank you, Amanda.  So, Joe, let’s move to you. 

[GRAPHIC CARD]

 

“I’m worried about having enough income for my healthcare needs in
retirement.  Should I take on more risk with my investments?”  

 

Our next question is for someone who might be worried about having enough
retirement income to cover their healthcare needs but with interest rates so
low, will they need to take on more investment risks?

How would you answer that?

[LOWER 3rd]

Joe Curtin

Head of CIO Portfolio Management 

Chief Investment Office

Merrill and Bank of America Private Bank

Joe Curtin:

Yeah, Lorna. When I first started my career, my answer to that question would’ve
been very different. We had very high yields on government bonds and corporate
bonds and much higher yields than today on savings deposits. Today, as you look
at yields, they’re anemically low.

[LOWER 3rd]

Inflation, taxes and expenses can lead to negative 

“real returns” for bonds and other fixed income investments.

And when you factor in inflation, taxes and expenses, you end up with what I
would say is a negative real return, the inability to keep up with inflation. 

As we work with clients, we would say they need to take a step back and ensure
they have the right asset allocation first. 

[LOWER 3rd]

A greater allocation to equities could help generate

more growth in a portfolio.  

Then within that asset allocation, in the short-term, we are allocating more of
the funds to equities and the mixture of the investment returns are different,
meaning more of the return comes from growth as opposed to interest or yield and
we think that’s a temporary phenomenon. 

That won’t last forever but in the near-term, it may mean taking on a little bit
more risk in the asset allocation and then within the asset allocation, the
composition of it being greater in equities. 

But that should also be supplemented with ensuring that the investment plan and
the savings strategy is revisited annually because we think things will
normalize at some point. It’s just a question of when it will happen. 

Lorna Sabbia:         

Excellent. Joe and Amanda, now I want to talk a little bit about gender. We know
that women often face additional health-related costs in retirement due in part
to their longer lifespan versus men. How could women think about and plan for
these additional expenses?

Amanda Lasher-Ross:

Yeah, I think for women, you called it out. It’s longevity, right? 

You look at statistics and it shows. 

[GRAPHIC]

Women and longevity

 

At age 65:

·      The average woman is likely to live

another 21.5 years

·      And will require 3.7 years 

of nursing care

(Sources: Social Security Administration, “Benefits Planner, Life Expectancy,”
Nov. 2020; 

U.S. Department of Health & Human Services, National Clearinghouse for Long-Term
Care Information, Feb. 2020).

 

The average woman at the age of 65 has a very good chance of living an
additional 20 years.  Statistics also showed that about 3.7 of those years, on
average, will be spent in some sort of nursing care. So expenses for women
particularly in the later years in life can be considerably higher than men. 

You marry that with the fact that women tend to be the caregivers. 

[LOWER 3rd]

Women tend to be caregivers and that can 

impact their ability to accumulate wealth. 

We are stepping in and out of the workforce not just at the end of life to
potentially be caring for an aging spouse or partner but intermittently along
the way, to have children and raise families, et cetera, so that impacts wealth
accumulation. 

You take those two things and it just means that women need to be a little bit
more intentional about planning for supplemental expense management as they get
into those later years in life and thinking about things like survivorship
benefits with Social Security.  Also, looking at pensions and survivorships with
pensions is something to consider. 

So thinking through those things, as we do tend to live longer, is a really
important part of a woman’s income plan in retirement.

Lorna Sabbia:

 That’s great. Joe, what about you? 

Joe Curtin:

Starting early on a saving strategy and investing strategy is really important.
Estimating what the impact of healthcare costs will be in addition to what the
retirement income need is and performing that analysis. 

But what’s unique is as we’ve done our own study, we’re about to release a
whitepaper on strategies to deal with rising healthcare costs in retirement
specifically for women, is oftentimes, as women are going through life, they do
tend to be impacted by life events. 

[GRAPHIC CARD]

Life events can impact planning

·      Having children

·      Caregiving

·      Divorce

·      Caring for aging parents

What could happen is birth of children, caregiving for those children, there
could be a divorce where you’re starting over again. They could also be, later
on, taking care of aging parents, et cetera. 

So starting early is critically important and ensuring that they revisit their
strategy at least annually, if not at each major life event so that if they fall
off track, they could get back on track. 

Lorna Sabbia:

Amanda, another big topic our clients ask us about all the time is Medicare. 

We know from people we speak with every day that many overestimate or are just
uncertain about what it does and doesn’t cover. 

What are some of the key points people should know about Medicare and also, what
options are there for someone who retires before they are eligible for Medicare
benefits?

Amanda Lasher-Ross:

To your point, Medicare doesn’t cover everything, right? There are, what we
call, gaps in Medicare coverage. For example, dental and vision is not typically
covered in basic Medicare. A lot of times, people don’t realize that. 

So getting educated on what does Medicare cover, what am I going to need and
what policies are out there that will help me fill those gaps, what do they
cost, are all things that people should be thinking about well before
retirement.  

And it all goes back to the income plan, so you can get an idea of what are
those supplemental coverage policies going to cost me and how do I incorporate
that into my essential expenses bucket. 

The other thing I see quite often is really three main gotchas, if you will,
when it comes to Medicare. 

First is that Medicare is an individual policy. 

[GRAPHIC CARD]

3 key points about Medicare

·       It’s an individual policy

So when you’re talking about expense planning, you want to be mindful of what
your expenses will be for yourself, but then also what your expenses might be
and your coverage needs might be for your spouse or partner.  

The second thing is that Medicare today starts at 65. 

 

[GRAPHIC CARD]

3 key points about Medicare

·      It’s an individual policy

·      Currently kicks in at age 65

We have clients that come in and say, “I want to retire before 65.” Well, that
means we have to find an alternative for insurance coverage between when you
actually retire and 65 and there are certainly options for that. 

[LOWER 3rd]

Options include a spouse’s employer’s plan, COBRA,

or a separate healthcare policy paid for out-of-pocket.

You can lean on a non-retired spouse’s employer plan. You can look at COBRA
which you could look at for up to 18 months. You can look at a different policy
that you can pay out of pocket for; but it’s definitely something that you want
to plan for that can be expensive. 

Oftentimes too, children or dependents will still be on a policy for a client
that’s retiring before the age of 65 and we need to be mindful of that coverage
need as well. 

The other thing is that Medicare does not cover long-term care expenses, which
is something a lot of people don’t realize. 

[GRAPHIC CARD]

3 key points about Medicare 

·      It’s an individual policy

·      Currently kicks in at age 65

·      Doesn’t cover long-term care

When you think through long-term care needs; that would need to be on top of
Medicare coverage. 

So again, getting educated on Medicare early, what it does and doesn’t cover and
how that will impact you individually in terms of an expense plan is really
important. 

Lorna Sabbia:

You just mentioned something that’s really important, because it’s another
question we hear a lot …

[GRAPHIC CARD]

 

“Should I consider long-term care insurance and what does it cover?”

 

…which is whether clients should consider long-term care insurance and what it
actually covers. 

What are some of the key points people should keep in mind and what else is
important for people to consider when it comes to legacy planning as well?

Amanda Lasher-Ross:

You know, long-term care I think is something that a lot of clients will
sometimes have a reaction to:  “Long-term care is not something I need or it’s
wildly expensive.” But I’d say that an unforeseen healthcare event can derail
the best-laid financial plan. We’ve seen this all too often. 

So I think it’s important to be mindful of what is your contingency plan. If you
were to have an unexpected healthcare event that could put you in a nursing
facility earlier than you expected, or longer than you expected, what could that
cost, what assets are at play to fund that expense?  

So looking at things like long-term care insurance is really prudent. 

[LOWER 3rd]

Long-term care policies have changed dramatically 

and can offer the opportunity for market participation.

I mean these policies have changed dramatically over the years. There is
opportunity for market participation, accumulation and growth over time. 

So I would encourage folks to take a look at long-term care, see if it’s
appropriate because these polices have come a long way and they can be the
safety net that you need to protect not only your own financial plan but also
your family. 

The other thing though that I think is important to mention is, if you become
incapacitated, who can make the decisions for you? Who can step in and
administer your wishes and your plan in the way that you had intended? 

[GRAPHIC CARD]

Important documents to maintain:

·       Updated will

·       Healthcare proxy

·       Power of Attorney

So having a will, having a healthcare proxy, having a power of attorney that are
recent and updated regularly and having your accounts coded it in a way that
will allow your estate team, your advisor to execute your plan as intended takes
work and takes forethought. 

So whether you’re thinking about long-term care, whether you’re thinking about
other contingency methods through self-funding and the like, having the proper
documents to complement that plan is very important as well. 

And Joe mentioned it, I mentioned it earlier, that’s never a one-and-done thing.
Things change. Costs change. Family dynamics change. So these are all
conversations you want to be having proactively in your annual review as a part
of your retirement planning process. 

Lorna Sabbia:

That’s great. Excellent. Joe, I want to turn to you to gain your outlook for the
market. As events around the pandemic continue to evolve, could we see an
increase in volatility or potentially, another market downturn?  

How would you suggest our viewers think about this and how it might affect their
financial security? 

Joe Curtin:   

Yeah, Lorna, it’s a great question and I think with the pandemic, what we’re
really seeing is everyone’s focused on the really short term. So I always like
to start out this conversation with “let’s understand what we’re investing
for.”  

The topic that we’re discussing today is retirement income as well as healthcare
costs in retirement. So the time horizon for that type of investing strategy or
those types of needs is really not only the point from today until you retire,
but the point at which you retire all the way through when you finish enjoying
your assets and potentially, pass them onto heirs. 

[LOWER 3rd]

Investing for future for retirement income and 

healthcare costs can involve a long time horizon.

So that could be a very long life span that we’re investing for.  

When you have that long of a time horizon, the biggest risk you have is actually
abandoning your strategy in the heat of the moment out of fear and actually not
participating in the rapid recovery. 

Just to give you an idea, we were in the mid-3,000 range on the S&P 500, which
measures U.S. large-cap stocks;

[GRAPHIC CARD]

The benefits of staying invested

 

On March 23, 2020:

·      The S&P 500 reached a low of 2,237 

On September 9, 2021:

·      The S&P 500 had rebounded to 4,493

·      Doubling its value from the pandemic lows

(Source: CNBC)

 

And that dropped as low as 2,200, 2,250 at the depth of the pandemic-related
shutdown and the market impact.  And if you look at the news today, the S&P 500
is hovering right around 4,500, almost double what it is at that trough. 

If you had just stayed in the market, you would’ve not only participated in that
recovery but received a handsome return off of that.  

What do we see coming out of the COVID environment? 

In a short-term, we really look at this and say, “We’ll have episodic
volatility.” We think in the near-term the markets look good, the recovery looks
good, well-cemented. Corporate profits are really good. It’s a good time for
investing, to participate in the early part of this new cycle that was created
by the pandemic.  

But more importantly, for those who are hesitant, if you’re watching the news
and you’re still hesitant and you’re not convinced that this recovery is solid,
maybe the best approach is don’t throw it all in at one time. 

 

[LOWER 3rd]

Dollar-cost averaging, or investing at regular intervals, 

can help reduce the impact of market volatility.

Dollar-cost average in and put bite-sized pieces into the markets to eliminate
the impact of volatility and it may help you get through it.  

But in the long term, we’re more encouraged by some of the investment
opportunities that the pandemic has created with disruptive innovation. 

Lorna Sabbia:

Great to hear. On that note, let me switch gears and talk about the angle of
being more opportunistic. 

 

[GRAPHIC CARD]

 

“How could I invest in some of the changes we’re seeing, including innovations
in healthcare?”  

 

How could someone think about how to invest in all the changes that we’re seeing
in the markets including innovations in healthcare? Tell us about some of the
opportunities you’re watching for.

Joe Curtin:

Yes. Lorna, obviously, the pandemic itself is something that we’re very
concerned about but the opportunities, the disruptive innovation, the
accelerated pace of innovation, post-COVID, are tremendous. 

The best way to participate in a lot of this innovation and disruptive
innovation is to be diversified first in some of these themes. 

[GRAPHIC CARD]

Investing in innovation

·      Big data         

·      Internet of Things 

·      Artificial intelligence

·      Data mining

·      Genomics

·      Future mobility 

They may cover things like big data, the internet of things, artificial
intelligence, data mining and even looking at genomic research.  As we also look
at future mobility, we’re seeing acceleration in the way that we commute, the
way that we drive cars, automation, driverless cars, transports, supply chain,
et cetera. 

Demographics is another area. We have those who are going to live longer into
retirement. Their life spans are increasing so they’ll be getting better
healthcare. They’ll be getting more testing. There’ll be advances in dealing
with aging and cognitive disorders. Those are all technologies we could invest
in. 

[LOWER 3rd]

Healthcare in general can provide opportunities for

investing in new technologies and innovation.

So healthcare in general, the way the vaccines were developed; the accelerated
pace of healthcare innovation is something that we haven’t seen in quite some
time. 

So the long and short of it is these are all great opportunities. They’re
already represented in diversified portfolios but for those who have a small
piece of their portfolios set aside for opportunistic investment strategies, we
would suggest perhaps investing in some of these megatrends, but we don’t do
that as a replacement. 

We do that as a complement to a diversified portfolio because concentrated
investment strategies tend to be a little bit more risky.

Lorna Sabbia:

Perfect. Those were a ton of ideas so thank you so much for sharing. 

I think that’s actually a perfect note to close on, so Amanda and Joe, thank you
for sharing these helpful ideas and suggestions. I know it’s a conversation
we’ll be continuing to have for many years to come. I want to thank you both for
joining me today. 

And I also want to take a moment and thank all of you for joining us today. We
hope both these conversations gave you some solid and actionable ideas that you
can put to work right away. 

Keep in mind that everyone’s situation is unique. 

[LOWER 3rd]

An advisor can help you understand how these ideas

could fit into your overall financial picture.

An advisor is a great resource for helping you understand how the ideas that we
discussed in this program may fit into your overall picture. If you’re working
with an advisor, we hope you’ll continue the conversation with them. 

Thanks again for watching and we wish you a safe, healthy and happy rest of the
year. 

 

IMPORTANT INFORMATION

 

Dr. Laura Carstensen is not affiliated with Bank of America Corporation.

Opinions are those of the speakers, as of the date of this event and are subject
to change.

 

Investing involves risk, including the possible loss of principal. Past
performance is no guarantee of future results.

This material should be regarded as educational information on healthcare cost
considerations and is not intended to provide specific healthcare advice. 

Bank of America and its affiliates, and financial advisors do not provide legal,
tax or accounting advice. You should consult your legal and/or tax advisors
before making any financial decisions.

 

Annuities are long-term investments designed to help meet retirement needs. An
annuity is a contractual agreement where a client makes payments to an insurance
company, which, in turn, agrees to pay out an income stream or a lump sum amount
at a later date. Annuities typically offer (1) tax-deferred treatment of
earnings; (2) a death benefit; and (3) annuity payout options that can provide
guaranteed income for life. 

 

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Long-term care insurance coverage contains benefits, exclusions, limitations,
eligibility requirements and specific terms and conditions. Not all insurance
policies and types of coverage may be available in your state.  

Participants can receive federal income tax-free distributions from their Health
Savings Account (HSA) to pay or be reimbursed for qualified medical expenses
they, their spouses or dependents incur after they establish the HSA. If they
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Keep in mind that dollar cost averaging cannot guarantee a profit or prevent a
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[PROGRAM OPEN WITH TEXT OVER MONTAGE OF VIDEO CLIPS]

 

Medical breakthroughs

 

Rising costs

 

Investment opportunities 

 

Caregiving needs

 

Preparing for longer lifespans …

 

… and health spans

 

Big changes in healthcare — will they change your financial life?

 

 

Please see important information at the end of this program.  Recorded on
09/09/2021.

[LOWER 3rd]

Lorna Sabbia

Head of Retirement & Personal Wealth Solutions 

Bank of America

Lorna Sabbia:         

Hello, everyone. I’m Lorna Sabbia, and thanks for joining me for this
conversation about healthcare. 

Even before the pandemic, our health and well-being were a top priority for
people of all ages, and the events of the past year and a half have made it an
even greater focus for many of us. 

On one hand, there are good reasons for optimism. 

Life expectancy in the U.S. over the past several decades has been steadily
rising, and new innovations and medical advances are dramatically improving our
quality of life. 

On the other hand, longer life, high-tech treatments, rising insurance premiums,
and out-of-pocket expenses are greatly increasing the cost of care, and that has
many of us wondering how we’ll pay for it all.

[GRAPHIC CARD]

60% of those worried about retirement income 

cited future healthcare costs as a key concern. 

(Source: Alliance for Lifetime Income, 

“Retirement Reset Tracker Survey,” May 2020)

 

In a recent survey, 60% of respondents who are worried about their income in
retirement cited future healthcare cost as a key concern. 

In this program, we’ll look at the many changes transforming the healthcare
landscape and what that could mean for you. 

A bit later, I’ll speak with two experts from Bank of America about some of the
most common questions we’re hearing from people on planning and saving for
healthcare at any age. And we’ll offer insights and ideas you could put to work
today to help you pursue greater financial wellness.

But first, I’m really pleased to be joined by Dr. Laura Carstensen, a renowned
psychologist, author and the founding director of Stanford University’s Center
on Longevity. 

Laura, thanks so much for joining me for this conversation.

Laura Carstensen:

Thanks for having me. It’s a pleasure to be with you today.

Lorna Sabbia:         

I want to start with a look at the Center on Longevity’s initiative called A New
Map of Life. It draws some powerful conclusions about the overall state of our
health. 

[GRAPHIC CARD]

Image on screen: Stanford Center on Longevity A New Map of Life™ homepage fades
in onscreen

Source: https://longevity.stanford.edu/a-new-map-of-life/

Tell us what you’re finding about how our views of health and wellness, both
physical and emotional, are changing and what role has the pandemic actually
played?

[LOWER 3rd]

Laura Carstensen, Ph.D.

Professor of Psychology Stanford University 

Director, Stanford Center on Longevity

Laura Carstensen:

The analysis that we have done in the New Map of Life™ is one where we’re
concluding that the angst that so many of us feel about aging -- at an
individual level, at a policy level, concerns about others, our parents, our
loved ones -- that this discomfort is really reflecting a mismatch between the
culture that guides us through life and the length of the lives that we’re
leading. 

 

[LOWER 3rd]

The New Map of Life™ initiative is helping redefine   

the way we live – from early to very late in life.

We need to change the way we live and we need to make changes from early in life
to very late in life and the New Map of Life initiative has set out to draw that
map.

If there is a silver lining in something as horrific as a pandemic, it’s that
crises can sort of remove us from the routines that we’ve been living in our
lives that are so familiar and let us take a look at what that’s like from a
distance perspective. 

So I think there were multiple disruptions and we’re going to see if maybe that
makes it a perfect time to rewrite the script.

 

Lorna Sabbia:         

I would like to look at what you’re finding about the connection between our
health and our financial wellness, and does that connection only apply to
individuals that are near or in retirement from your perspective?

Laura Carstensen:

One of things that the New Map of Life is concluding again and again and again
is that this is a life course issue. One of the challenges or I think the
concerns that people have had earlier in planning is that we started to think
about retirement and our health and later life when we were in our late 50s,
when it was just around the corner. 

But of course, the health that you enjoy or suffer from in your later years for
most of us these days has its roots much earlier in life.  Chronic diseases,
nutrition, obesity, arthritis, heart disease; these are the conditions that are
threatening life in old age and they start much, much, much earlier.

[GRAPHIC CARD]

A New Map of Life™

 

·      Exploring ways to make 

green spaces more available

(Source: The Stanford Center on Longevity)

 

And so on the New Map of Life, we’re thinking about ways to make, say, green
spaces more available for all people, not just those who live in affluent
neighborhoods, so that people can walk more, can engage more in their
communities. 

[GRAPHIC CARD]

A New Map of Life™

 

·      Exploring ways to make 

green spaces more available

·      Finding ways to build social 

connections throughout life

(Source: The Stanford Center on Longevity)

 

We’re seeing that social connections have a great bearing on our physical
health, so how do we build them early in life and then maintain them throughout
life? 

So we’re really looking at the intersections which are numerous across different
domains and all of them end up affecting our financial wellness.

Lorna Sabbia:         

Would you say the events of the past year and a half have made planning for
healthcare costs early on -- you’re sort of touching on that -- more important
now than ever?

Laura Carstensen:

I think it’s finally beginning to dawn on us that only treating diseases once
they happen is not the best way to deliver good health to a population. 

Again, let me just link good health to financial wellness. I don’t have to tell
you, Lorna, that those are intricately linked, right. If you’re healthy, you can
work more, you can work longer, you can engage more and so people who are
healthy are going to be more financially secure. So yes, we see those
connections and how they have been changing.

[LOWER 3rd]

Emotional well-being, physical fitness and 

financial security are all interconnected.

We’ve come to think that emotional well-being, physical fitness and financial
security are three legs of a stool and if anyone is missing, we’re in
trouble.  But if we can shore up those domains of life - and we can - then we
would be able to create a world where the majority of people arrive at old age
mentally sharp, physically fit and financially secure.

Lorna Sabbia:

Excellent. You’re really talking about disruption and so disruptive times often
lead to remarkable innovations and we see many; from vaccines obviously
delivered at record speed to hospitals converting to tele-health literally
almost overnight. 

What other game changing breakthroughs are you seeing and what could they mean
for our overall health and quality of life?

Laura Carstensen:

In my view, among the most exciting areas of science writ large is Geroscience. 

[LOWER 3rd]

Geroscience studies the processes that put us  

at risk for different diseases as we grow older.

It’s the science of aging itself, the study of the processes that occur as we
grow older that put us at risk for all sorts of diseases. Scientists are making
real gains in understanding ways we might be able to slow the biological changes
that occur as we age that put us at risk for all diseases. To the extent that we
can achieve that, we can remain healthier, stronger, fitter for many, many more
years of our lives.

Lorna Sabbia:         

I want to switch gears and talk about caregivers and obviously, they often face
a unique set of financial and emotional challenges for sure. How do you feel
their roles and situations have been changing?

Laura Carstensen:

I like to think of these issues in historical context, kind of zooming out. A
century ago, most people were sick for about two weeks before they died. We were
dying from different kinds of diseases. We would get a gastrointestinal disease
from some food contamination or something, or catch the flu and be dead in a
couple of weeks. So caregiving was not something that most people experienced
for decades. That has changed.

Today, most of us, thankfully, are living longer and are able to live even with
chronic diseases. What that means, however, is that people often need assistance
for much longer than we did in the past. 

Today, we can be healthy, not so healthy and still survive for years. And so the
biggest change for caregivers is really the length of time that people are
providing care to loved ones who need care.

Lorna Sabbia:         

And I also think about the topic of caregivers providing care for multiples of
folks at the same exact time, and I think the pandemic has been a perfect
example of sort of teasing that out.

Laura, there have been a number of studies ranking the healthcare system in the
United States as low when compared to other developed economies. I’m curious to
know why do you think that is the case and are there policy changes that could
help, such as expanding Medicare or other reforms?

Laura Carstensen:

Yes. The United States compared to other developed nations spends more on
healthcare than basically any other country, so we’re spending an awful lot. Let
me say that the care that we get is absolutely high quality in the United
States. 

So the healthcare providers, the physicians, the treatments are breathtakingly
effective, so that the care we get is actually very good. The cost is not so
good.

The other issue that we’re just beginning to wrestle with, and again, I think
the pandemic reminded us of this, is we’ll do a lot better if we invest in
maintaining our health than treating each disease as it occurs. And so rather
than wait until people are really sick and they need to access the healthcare
system, we need to invest in public health. 

We spend far less on public health preventive efforts than we do on the
treatment of diseases and we really need to flip those around.

If I can say one thing about Medicare, if we were to allow Medicare to be the
primary provider for workers who are older, we would be able to help employers
be incented to retain older workers and it will help our economy greatly and
individuals greatly if people can work longer. 

So to the extent that we can solve some of the health insurance costs in ways
that will allow people to continue to work, then I think we’ll all do better.

Lorna Sabbia:         

That makes sense, absolutely. 

Laura, we often hear about the impressive gains in lifespans, but there’s also a
growing focus on our health spans, or the number of years when we’re productive
and in good physical and cognitive health. 

Would you say we’re making progress there?

Laura Carstensen:

I think we are making progress, but it’s uneven in the population.  For some
subgroups in the population, health span is aligning with lifespan. And in
others, we’re not making enough progress.

[LOWER 3rd]

“Health span” refers to the numbers of years 

that we’re healthy and free from disease.

 

Health span really should be the metric that we use to gauge whether or not
we’re on the right track or the wrong track, not lifespan or life expectancy.  

What’s happening today is that we see health span and lifespan aligning in those
individuals who are living affluent lives.  The highly educated, wealthy
individuals in our country are living healthy lives for most of their lives and
having a relatively short period of time when they’re functionally impaired.  

But that’s not happening for the majority of the population.  And for people
with lower levels of education, with less family wealth, individual wealth,
we’re seeing functional health decline over time gradually from the time people
are in their 30s and 40s. They’re getting less functionally healthy. 

For our nation to thrive, for our economy to thrive, we need to bring everyone
along.  And so we need to think seriously about changes we can make in the
population where all of us benefit from better health.

Lorna Sabbia:         

That makes a lot of sense. I know that we always probably don’t talk about it
enough but we all know that keeping our brain healthy is so important, clearly,
especially as we get older. I’m curious to know what suggestions you may have
for us on that topic, too.

Laura Carstensen:

My best suggestion for cognitive health is actually the same suggestion I would
make for physical health and that is exercise. It’s the best thing we can do to
maintain our health and our function into very advanced ages. 

Take a walk in the mornings, go for a couple miles or one mile or even a half a
mile, and you’ll feel better. Cognitively, you’ll be sharper and physiologically
you’ll be sharper. Our brains are part of our bodies and they benefit from our
overall health. So I think that’s the best recommendation I can give for
cognitive health and physical health.

If I could say one more word about emotion, the best thing you could do for
emotion, too. Emotional health benefits from exercise as well.

Lorna Sabbia:         

It makes sense. You know. I often hear healthy heart, healthy brain, and so I
think you’re getting to that certainly with your exercise comment.

You know, Laura, there’s a wonderful sense of empathy and optimism that comes
through in all of your research on how we can live our best lives at any age.
I’d like to close by asking about what you learned living through the pandemic
and are you hopeful we could emerge from this stronger or at least with the
collective tools and knowledge to create a better path forward?

Laura Carstensen:

What a great question. The emotion I have felt during the pandemic more than any
other emotion has been gratitude. 

You realize I think when in a crisis time what matters most of all, and so I
think a lot of us have come to appreciate more the people, the places, the
resources that we have in our lives and I’m certainly one of many who have
experienced that. 

I must say it comes with a little bit of guilt because so many Americans have
suffered so much that being able to feel like I’m seeing the world as more
precious than I ever saw it before makes me feel even more empathy and concern
for those who haven’t been able to experience the world that way.  

But we live in a beautiful place and when we’re reminded of our mortality, it
makes most of us appreciative.

Lorna Sabbia:         

I think that’s a perfectly inspiring note to end with. Laura, thank you so much
for sharing your insights. You’ve given us a lot of important things to think
about. We really appreciate it.

Laura Carstensen:

Thank you. 

 

Lorna Sabbia:         

Now, we’re going to switch gears and we’re going to dig into some of the
questions clients have told us are most on their minds today and these include
how to plan for rising healthcare costs, questions around Medicare and long-term
care insurance and ways to invest in healthcare innovations. 

Joining me for this part of the program is Joe Curtin, head of Portfolio
Management for our Chief Investment Office for Merrill and Bank of America
Private Bank. 

Amanda Lasher-Ross, Managing Director, heads Personal Retirement and Wealth
Impact Planning for the retirement business at Bank of America. 

So, Amanda and Joe, this program is about the big changes we’re seeing in
healthcare and what they could mean for our financial lives. 

[GRAPHIC CARD]

“How can I plan now for rising healthcare costs so I don’t risk my 

long-term financial security?”

 

One of the most common questions we hear from clients is how they can plan for
and fund rising health and medical costs without jeopardizing their wealth or
long-term financial security and it’s a really important point. 

So how can we think about this concern and how it relates to retirement and are
there steps people could consider at any age?

[LOWER 3rd]

Amanda Lasher-Ross

Managing Director, Retirement & Personal Wealth Solutions 

Bank of America

 

Amanda Lasher-Ross:

Sure, Lorna, I can jump in. One of the big questions that we ask clients to
think about as they approach retirement is how am I going to generate income? 

You spend your entire life accumulating wealth, receiving a paycheck, in most
cases, from an employer and all of a sudden, you switch into retirement and now,
you need to generate your own paycheck for what can sometimes be over 20 years
and that can be an unnatural shift for clients to make. 

So the sooner you can start thinking about developing an income plan, it really
does create a strong foundation for your overall retirement conversation. 

When we think about income, we ask clients to really think about it in three
ways or three buckets. 

[GRAPHIC CARD]

3 “buckets” in your retirement income plan:

·       Your essential expenses

First is what are my essential expenses; what do I need to keep the lights on,
to take the medication that I need? What are the expenses that I have,
literally, month over month that I just cannot do without? 

[GRAPHIC CARD]

3 “buckets” in your retirement income plan:

·       Your essential expenses

·       Your important expenses

·       Your aspirational expenses

Then you can think about other expenses that are important or even aspirational
in a second and third bucket.  

But we really like to double down on the essential expenses conversation and
talk to clients about “how can we create sources of income to cover these
essential expenses?” 

Certainly, things like Social Security; for those folks that have pensions,
those are great guaranteed income sources that clients will leverage in
retirement. 

[LOWER 3rd]

Social Security, pensions and annuities can all go 

toward funding your essential expenses bucket.

But oftentimes, there’s a gap, right? There’s a gap between what I have and what
I need. Looking at solutions like an annuity, for example, is a great way to
think about bridging that gap to make sure that our essential expense bucket is
filled. 

It’s not a one-and-done conversation, right? We need to make sure we’re
revisiting that regularly but starting with the income plan is really the first
step in building that foundational retirement plan that can really help get you
there.

Lorna Sabbia:

 How can someone get started if they haven’t done so or get back on track if
they’ve fallen behind? Are there specific strategies and resources that they
could consider?

Amanda Lasher-Ross:

The important thing to think about is saving, right, accumulation, bringing as
much into the retirement portfolio as possible and how can you take advantage of
tax-efficient vehicles to do that? 

A couple of things to think about are, one, Health Savings Account. If you’re
part of a high deductible plan, you’re eligible for a Health Savings Account. 

What is that, right? It’s a way for you to put away money to spend on healthcare
expenses with really three main tax benefits. 

 

[GRAPHIC CARD]

Health Savings Accounts (HSAs):

·       Eligible if you have a High Deductible Health Plan and meet other tax
law requirements

·       Contributions made through payroll deductions are pre-tax 

·       Any potential growth on investments is tax deferred

·       Distributions are tax free for qualified medical expenses

·       Funds roll over from year to year

You’re putting money in pre-tax. It grows tax deferred and then when you take it
out, it’s tax-free on qualified distributions and it’s not something that you
lose at the end of the year if you don’t use it. You can put money in to save it
for later when your healthcare costs accumulate. 

The other thing to think about is if I’m over the age of 50, am I taking
advantage of what’s called catch-up elections? 

[GRAPHIC CARD]

2021 catch-up contributions for folks 50+

 

For an IRA:

·       An additional $1,000

·       For a total of $7,000

For a 401(k)*:

·       An additional $6,500

·       For a total of $26,000

(Source: Internal Revenue Service)

*Check your employer’s 401(k) plan document to determine if catch-up
contributions are available. 

 

In IRAs, for example, this year, you can put $6,000.00 into an IRA but if you’re
over 50, you get a $1,000.00 in a catch-up election which allows you to put away
$7,000.00. There’s a catch-up for 401(k)s as well. 

So saving in a tax-efficient way is really important at any age and the thing
you want to think about particularly when you’re talking about healthcare
expenses is that healthcare expenses are volatile, right? We know this, like
things that happen in public policy, with technology, with medications can
change healthcare costs pretty dramatically year-over-year. 

So it just makes it all that much more important to think about income, to
assess these expenses and to get your savings happening in the right place so
that you can accumulate as much as you can over time.

Lorna Sabbia:         

Excellent, super helpful. Thank you, Amanda.  So, Joe, let’s move to you. 

[GRAPHIC CARD]

 

“I’m worried about having enough income for my healthcare needs in
retirement.  Should I take on more risk with my investments?”  

 

Our next question is for someone who might be worried about having enough
retirement income to cover their healthcare needs but with interest rates so
low, will they need to take on more investment risks?

How would you answer that?

[LOWER 3rd]

Joe Curtin

Head of CIO Portfolio Management 

Chief Investment Office

Merrill and Bank of America Private Bank

Joe Curtin:

Yeah, Lorna. When I first started my career, my answer to that question would’ve
been very different. We had very high yields on government bonds and corporate
bonds and much higher yields than today on savings deposits. Today, as you look
at yields, they’re anemically low.

[LOWER 3rd]

Inflation, taxes and expenses can lead to negative 

“real returns” for bonds and other fixed income investments.

And when you factor in inflation, taxes and expenses, you end up with what I
would say is a negative real return, the inability to keep up with inflation. 

As we work with clients, we would say they need to take a step back and ensure
they have the right asset allocation first. 

[LOWER 3rd]

A greater allocation to equities could help generate

more growth in a portfolio.  

Then within that asset allocation, in the short-term, we are allocating more of
the funds to equities and the mixture of the investment returns are different,
meaning more of the return comes from growth as opposed to interest or yield and
we think that’s a temporary phenomenon. 

That won’t last forever but in the near-term, it may mean taking on a little bit
more risk in the asset allocation and then within the asset allocation, the
composition of it being greater in equities. 

But that should also be supplemented with ensuring that the investment plan and
the savings strategy is revisited annually because we think things will
normalize at some point. It’s just a question of when it will happen. 

Lorna Sabbia:         

Excellent. Joe and Amanda, now I want to talk a little bit about gender. We know
that women often face additional health-related costs in retirement due in part
to their longer lifespan versus men. How could women think about and plan for
these additional expenses?

Amanda Lasher-Ross:

Yeah, I think for women, you called it out. It’s longevity, right? 

You look at statistics and it shows. 

[GRAPHIC]

Women and longevity

 

At age 65:

·      The average woman is likely to live

another 21.5 years

·      And will require 3.7 years 

of nursing care

(Sources: Social Security Administration, “Benefits Planner, Life Expectancy,”
Nov. 2020; 

U.S. Department of Health & Human Services, National Clearinghouse for Long-Term
Care Information, Feb. 2020).

 

The average woman at the age of 65 has a very good chance of living an
additional 20 years.  Statistics also showed that about 3.7 of those years, on
average, will be spent in some sort of nursing care. So expenses for women
particularly in the later years in life can be considerably higher than men. 

You marry that with the fact that women tend to be the caregivers. 

[LOWER 3rd]

Women tend to be caregivers and that can 

impact their ability to accumulate wealth. 

We are stepping in and out of the workforce not just at the end of life to
potentially be caring for an aging spouse or partner but intermittently along
the way, to have children and raise families, et cetera, so that impacts wealth
accumulation. 

You take those two things and it just means that women need to be a little bit
more intentional about planning for supplemental expense management as they get
into those later years in life and thinking about things like survivorship
benefits with Social Security.  Also, looking at pensions and survivorships with
pensions is something to consider. 

So thinking through those things, as we do tend to live longer, is a really
important part of a woman’s income plan in retirement.

Lorna Sabbia:

 That’s great. Joe, what about you? 

Joe Curtin:

Starting early on a saving strategy and investing strategy is really important.
Estimating what the impact of healthcare costs will be in addition to what the
retirement income need is and performing that analysis. 

But what’s unique is as we’ve done our own study, we’re about to release a
whitepaper on strategies to deal with rising healthcare costs in retirement
specifically for women, is oftentimes, as women are going through life, they do
tend to be impacted by life events. 

[GRAPHIC CARD]

Life events can impact planning

·      Having children

·      Caregiving

·      Divorce

·      Caring for aging parents

What could happen is birth of children, caregiving for those children, there
could be a divorce where you’re starting over again. They could also be, later
on, taking care of aging parents, et cetera. 

So starting early is critically important and ensuring that they revisit their
strategy at least annually, if not at each major life event so that if they fall
off track, they could get back on track. 

Lorna Sabbia:

Amanda, another big topic our clients ask us about all the time is Medicare. 

We know from people we speak with every day that many overestimate or are just
uncertain about what it does and doesn’t cover. 

What are some of the key points people should know about Medicare and also, what
options are there for someone who retires before they are eligible for Medicare
benefits?

Amanda Lasher-Ross:

To your point, Medicare doesn’t cover everything, right? There are, what we
call, gaps in Medicare coverage. For example, dental and vision is not typically
covered in basic Medicare. A lot of times, people don’t realize that. 

So getting educated on what does Medicare cover, what am I going to need and
what policies are out there that will help me fill those gaps, what do they
cost, are all things that people should be thinking about well before
retirement.  

And it all goes back to the income plan, so you can get an idea of what are
those supplemental coverage policies going to cost me and how do I incorporate
that into my essential expenses bucket. 

The other thing I see quite often is really three main gotchas, if you will,
when it comes to Medicare. 

First is that Medicare is an individual policy. 

[GRAPHIC CARD]

3 key points about Medicare

·       It’s an individual policy

So when you’re talking about expense planning, you want to be mindful of what
your expenses will be for yourself, but then also what your expenses might be
and your coverage needs might be for your spouse or partner.  

The second thing is that Medicare today starts at 65. 

 

[GRAPHIC CARD]

3 key points about Medicare

·      It’s an individual policy

·      Currently kicks in at age 65

We have clients that come in and say, “I want to retire before 65.” Well, that
means we have to find an alternative for insurance coverage between when you
actually retire and 65 and there are certainly options for that. 

[LOWER 3rd]

Options include a spouse’s employer’s plan, COBRA,

or a separate healthcare policy paid for out-of-pocket.

You can lean on a non-retired spouse’s employer plan. You can look at COBRA
which you could look at for up to 18 months. You can look at a different policy
that you can pay out of pocket for; but it’s definitely something that you want
to plan for that can be expensive. 

Oftentimes too, children or dependents will still be on a policy for a client
that’s retiring before the age of 65 and we need to be mindful of that coverage
need as well. 

The other thing is that Medicare does not cover long-term care expenses, which
is something a lot of people don’t realize. 

[GRAPHIC CARD]

3 key points about Medicare 

·      It’s an individual policy

·      Currently kicks in at age 65

·      Doesn’t cover long-term care

When you think through long-term care needs; that would need to be on top of
Medicare coverage. 

So again, getting educated on Medicare early, what it does and doesn’t cover and
how that will impact you individually in terms of an expense plan is really
important. 

Lorna Sabbia:

You just mentioned something that’s really important, because it’s another
question we hear a lot …

[GRAPHIC CARD]

 

“Should I consider long-term care insurance and what does it cover?”

 

…which is whether clients should consider long-term care insurance and what it
actually covers. 

What are some of the key points people should keep in mind and what else is
important for people to consider when it comes to legacy planning as well?

Amanda Lasher-Ross:

You know, long-term care I think is something that a lot of clients will
sometimes have a reaction to:  “Long-term care is not something I need or it’s
wildly expensive.” But I’d say that an unforeseen healthcare event can derail
the best-laid financial plan. We’ve seen this all too often. 

So I think it’s important to be mindful of what is your contingency plan. If you
were to have an unexpected healthcare event that could put you in a nursing
facility earlier than you expected, or longer than you expected, what could that
cost, what assets are at play to fund that expense?  

So looking at things like long-term care insurance is really prudent. 

[LOWER 3rd]

Long-term care policies have changed dramatically 

and can offer the opportunity for market participation.

I mean these policies have changed dramatically over the years. There is
opportunity for market participation, accumulation and growth over time. 

So I would encourage folks to take a look at long-term care, see if it’s
appropriate because these polices have come a long way and they can be the
safety net that you need to protect not only your own financial plan but also
your family. 

The other thing though that I think is important to mention is, if you become
incapacitated, who can make the decisions for you? Who can step in and
administer your wishes and your plan in the way that you had intended? 

[GRAPHIC CARD]

Important documents to maintain:

·       Updated will

·       Healthcare proxy

·       Power of Attorney

So having a will, having a healthcare proxy, having a power of attorney that are
recent and updated regularly and having your accounts coded it in a way that
will allow your estate team, your advisor to execute your plan as intended takes
work and takes forethought. 

So whether you’re thinking about long-term care, whether you’re thinking about
other contingency methods through self-funding and the like, having the proper
documents to complement that plan is very important as well. 

And Joe mentioned it, I mentioned it earlier, that’s never a one-and-done thing.
Things change. Costs change. Family dynamics change. So these are all
conversations you want to be having proactively in your annual review as a part
of your retirement planning process. 

Lorna Sabbia:

That’s great. Excellent. Joe, I want to turn to you to gain your outlook for the
market. As events around the pandemic continue to evolve, could we see an
increase in volatility or potentially, another market downturn?  

How would you suggest our viewers think about this and how it might affect their
financial security? 

Joe Curtin:   

Yeah, Lorna, it’s a great question and I think with the pandemic, what we’re
really seeing is everyone’s focused on the really short term. So I always like
to start out this conversation with “let’s understand what we’re investing
for.”  

The topic that we’re discussing today is retirement income as well as healthcare
costs in retirement. So the time horizon for that type of investing strategy or
those types of needs is really not only the point from today until you retire,
but the point at which you retire all the way through when you finish enjoying
your assets and potentially, pass them onto heirs. 

[LOWER 3rd]

Investing for future for retirement income and 

healthcare costs can involve a long time horizon.

So that could be a very long life span that we’re investing for.  

When you have that long of a time horizon, the biggest risk you have is actually
abandoning your strategy in the heat of the moment out of fear and actually not
participating in the rapid recovery. 

Just to give you an idea, we were in the mid-3,000 range on the S&P 500, which
measures U.S. large-cap stocks;

[GRAPHIC CARD]

The benefits of staying invested

 

On March 23, 2020:

·      The S&P 500 reached a low of 2,237 

On September 9, 2021:

·      The S&P 500 had rebounded to 4,493

·      Doubling its value from the pandemic lows

(Source: CNBC)

 

And that dropped as low as 2,200, 2,250 at the depth of the pandemic-related
shutdown and the market impact.  And if you look at the news today, the S&P 500
is hovering right around 4,500, almost double what it is at that trough. 

If you had just stayed in the market, you would’ve not only participated in that
recovery but received a handsome return off of that.  

What do we see coming out of the COVID environment? 

In a short-term, we really look at this and say, “We’ll have episodic
volatility.” We think in the near-term the markets look good, the recovery looks
good, well-cemented. Corporate profits are really good. It’s a good time for
investing, to participate in the early part of this new cycle that was created
by the pandemic.  

But more importantly, for those who are hesitant, if you’re watching the news
and you’re still hesitant and you’re not convinced that this recovery is solid,
maybe the best approach is don’t throw it all in at one time. 

 

[LOWER 3rd]

Dollar-cost averaging, or investing at regular intervals, 

can help reduce the impact of market volatility.

Dollar-cost average in and put bite-sized pieces into the markets to eliminate
the impact of volatility and it may help you get through it.  

But in the long term, we’re more encouraged by some of the investment
opportunities that the pandemic has created with disruptive innovation. 

Lorna Sabbia:

Great to hear. On that note, let me switch gears and talk about the angle of
being more opportunistic. 

 

[GRAPHIC CARD]

 

“How could I invest in some of the changes we’re seeing, including innovations
in healthcare?”  

 

How could someone think about how to invest in all the changes that we’re seeing
in the markets including innovations in healthcare? Tell us about some of the
opportunities you’re watching for.

Joe Curtin:

Yes. Lorna, obviously, the pandemic itself is something that we’re very
concerned about but the opportunities, the disruptive innovation, the
accelerated pace of innovation, post-COVID, are tremendous. 

The best way to participate in a lot of this innovation and disruptive
innovation is to be diversified first in some of these themes. 

[GRAPHIC CARD]

Investing in innovation

·      Big data         

·      Internet of Things 

·      Artificial intelligence

·      Data mining

·      Genomics

·      Future mobility 

They may cover things like big data, the internet of things, artificial
intelligence, data mining and even looking at genomic research.  As we also look
at future mobility, we’re seeing acceleration in the way that we commute, the
way that we drive cars, automation, driverless cars, transports, supply chain,
et cetera. 

Demographics is another area. We have those who are going to live longer into
retirement. Their life spans are increasing so they’ll be getting better
healthcare. They’ll be getting more testing. There’ll be advances in dealing
with aging and cognitive disorders. Those are all technologies we could invest
in. 

[LOWER 3rd]

Healthcare in general can provide opportunities for

investing in new technologies and innovation.

So healthcare in general, the way the vaccines were developed; the accelerated
pace of healthcare innovation is something that we haven’t seen in quite some
time. 

So the long and short of it is these are all great opportunities. They’re
already represented in diversified portfolios but for those who have a small
piece of their portfolios set aside for opportunistic investment strategies, we
would suggest perhaps investing in some of these megatrends, but we don’t do
that as a replacement. 

We do that as a complement to a diversified portfolio because concentrated
investment strategies tend to be a little bit more risky.

Lorna Sabbia:

Perfect. Those were a ton of ideas so thank you so much for sharing. 

I think that’s actually a perfect note to close on, so Amanda and Joe, thank you
for sharing these helpful ideas and suggestions. I know it’s a conversation
we’ll be continuing to have for many years to come. I want to thank you both for
joining me today. 

And I also want to take a moment and thank all of you for joining us today. We
hope both these conversations gave you some solid and actionable ideas that you
can put to work right away. 

Keep in mind that everyone’s situation is unique. 

[LOWER 3rd]

An advisor can help you understand how these ideas

could fit into your overall financial picture.

An advisor is a great resource for helping you understand how the ideas that we
discussed in this program may fit into your overall picture. If you’re working
with an advisor, we hope you’ll continue the conversation with them. 

Thanks again for watching and we wish you a safe, healthy and happy rest of the
year. 

 

IMPORTANT INFORMATION

 

Dr. Laura Carstensen is not affiliated with Bank of America Corporation.

Opinions are those of the speakers, as of the date of this event and are subject
to change.

 

Investing involves risk, including the possible loss of principal. Past
performance is no guarantee of future results.

This material should be regarded as educational information on healthcare cost
considerations and is not intended to provide specific healthcare advice. 

Bank of America and its affiliates, and financial advisors do not provide legal,
tax or accounting advice. You should consult your legal and/or tax advisors
before making any financial decisions.

 

Annuities are long-term investments designed to help meet retirement needs. An
annuity is a contractual agreement where a client makes payments to an insurance
company, which, in turn, agrees to pay out an income stream or a lump sum amount
at a later date. Annuities typically offer (1) tax-deferred treatment of
earnings; (2) a death benefit; and (3) annuity payout options that can provide
guaranteed income for life. 

 

All annuity contract and rider guarantees, including optional benefits or
annuity payout rates and all guarantees and benefits of an insurance policy are
backed by the claims-paying ability of the issuing insurance company. They are
not backed by Bank of America, Merrill or its affiliates, nor does Bank of
America, Merrill 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. Not all insurance
policies and types of coverage may be available in your state.  

Participants can receive federal income tax-free distributions from their Health
Savings Account (HSA) to pay or be reimbursed for qualified medical expenses
they, their spouses or dependents incur after they establish the HSA. If they
receive distributions for other reasons, the amount they withdraw will be
subject to federal income tax and may be subject to an additional 20% federal
tax. Any interest or earnings on the assets in the account are federal income
tax-free. Amounts contributed directly to an HSA by an employer are generally
not included in taxable income. Also, if participants or someone else make
after-tax contributions to their HSA the contribution may be tax deductible.
Certain limits may apply to employees who are considered highly compensated or
key employees if the employer makes contributions to the HSA or the employee
makes contributions through payroll deductions. Bank of America recommends
individuals contact qualified tax or legal counsel before establishing an HSA.

Asset allocation, diversification, dollar-cost averaging and rebalancing do not
ensure a profit or protect against loss in declining markets.

Keep in mind that dollar cost averaging cannot guarantee a profit or prevent a
loss. Since such an

investment plan involves continual investment in securities regardless of
fluctuating price levels,

you should consider your willingness to continue purchasing during periods of
high or low price

levels.

Investments have varying degrees of risk. Some of the risks involved with equity
securities include the possibility that the value of the stocks may fluctuate in
response to events specific to the companies or markets, as well as economic,
political or social events in the U.S. or abroad.  Investing in fixed-income
securities may involve certain risks, including the credit quality of individual
issuers, possible prepayments, market or economic developments and yields and
share price fluctuations due to changes in interest rates. When interest rates
go up, bond prices

typically drop, and vice versa.  Bonds are subject to interest rate, inflation
and credit risks.  Investments in a certain industry or sector may pose
additional risk due to lack of diversification and sector concentration. 



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This webcast, hosted by Lorna Sabbia, Head of Retirement & Personal Wealth
Solutions at Bank of America, featured Dr. Laura Carstensen, founding director
of the Stanford Center on Longevity and a leading expert on aging. Dr.
Carstensen highlights emerging healthcare trends. She also shares her thoughts
on the critical lessons we’re learning from the pandemic and how we could emerge
from it stronger than before.

Then Joe Curtin and Amanda Lasher-Ross join Lorna to address key questions from
Merrill clients, including:

 * How can I plan for rising healthcare costs?
 * What do I need to know about Medicare and long-term care insurance?
 * Are there opportunities to invest in healthcare innovation?


HOST AND SPECIAL GUEST




HOST LORNA SABBIA

Head of Retirement & Personal Wealth Solutions, Bank of America

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SPECIAL GUEST LAURA CARSTENSEN, PH.D.

Professor of Psychology Stanford University Director, Stanford Center on
Longevity

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EXPERT PANELISTS:




JOE CURTIN

Head of CIO Portfolio Management, Chief Investment Office, Merrill and Bank of
America Private Bank

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AMANDA LASHER-ROSS

Managing Director, Retirement & Personal Wealth Solutions, Bank of America

Read full bio 


More for you

Get more insights on how to prepare financially for the cost of healthcare.

 

Learn more about how Merrill can help you invest for your financial goals.

 

Make an appointment to talk with us.

 

Merrill Guided Investing and Merrill Edge Self-Directed clients can log in for
additional planning resources.

Important Disclosures

Dr. Laura Carstensen is not affiliated with Bank of America Corporation.

Opinions are those of the speakers, as of the date of this event and are subject
to change.

Investing involves risk, including the possible loss of principal. Past
performance is no guarantee of future results.

Long-term care insurance coverage contains benefits, exclusions, limitations,
eligibility requirements and specific terms and conditions. Not all insurance
policies and types of coverage may be available in your state. Traditional
long-term care insurance is available only from a small number of insurance
companies and is not currently offered through Merrill.

This material should be regarded as educational information on healthcare cost
considerations and is not intended to provide specific healthcare advice. If you
have questions regarding your particular situation, please contact your legal or
tax advisor.

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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 and investment advisory services are provided by
wholly owned non-bank affiliates of BofA Corp., including Merrill Lynch, Pierce,
Fenner & Smith Incorporated (also referred to as “MLPF&S” or “Merrill”), a
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The Chief Investment Office (CIO) provides thought leadership on wealth
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America, N.A., (“Bank of America”) and Merrill Lynch, Pierce, Fenner & Smith
Incorporated (“MLPF&S” or “Merrill”), a registered broker-dealer, registered
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