The new retirement: Will you be ready?

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VIRTUAL PROGRAM
The pandemic has accelerated many trends that could affect the way you plan for and live in retirement. Learn how these trends can impact your plans and what steps to consider taking now.
How the pandemic has changed retirement planning and trends

The New Retirement: Will You Be Ready?

Hosted by:
Aron Levine
President, Preferred and Consumer Banking & Investments,
Bank of America
With:
Ken Dychtwald
Co-founder and CEO, Age Wave
Lorna Sabbia
Head of Retirement & Personal Wealth Solutions
Bank of America
Surya Kolluri
Head of Retirement Thought Leadership
Bank of America
And:
Chris Hyzy
Chief Investment Officer
Merrill and Bank of America Private Bank
[PROGRAM OPEN WITH TEXT OVER MONTAGE OF VIDEO CLIPS]
Changing priorities
Longer lifespans
New opportunities
Retiring early …
Or working longer
The New Retirement: Will You Be Ready?
Please see important information at the end of this program. Recorded on 02/26/2021.
Hello, and welcome to this look at retirement today. The new retirement: will you be ready? I'm Aron Levine.
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Aron Levine
President, Preferred and Consumer Banking & Investments
Bank of America
The pandemic hasn't just changed our daily lives. It's reshaped our expectations for what the future may hold. People who are nearing or already in retirement are revisiting long-held assumptions about when they'll be ready to retire, where they want to live and how well prepared they are to handle future healthcare needs. And they're uncertain what a pandemic might mean for the economy and their retirement assets.
At the same time, retirement holds more opportunities today than in any time in history. The pandemic has accelerated some positive trends, like personalized medicine and remote work that hold immense promise for a generation with no intention to slow down.
This program is designed to help you understand and navigate these emerging trends to help you live the life you want in retirement. A bit later, you'll hear from experts from Bank of America and Merrill with practical steps you can consider now to prepare for the years ahead.
But first, to help us sort through the complexities of today's new retirement realities,
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Ken Dychtwald
Co-founder and CEO, Age Wave
I'm joined by Ken Dychtwald, co-founder of Age Wave and one of the leading experts on the topic of retirement and aging.
Ken, thanks so much for joining us. It's great to see you again, my friend.
Ken Dychtwald:
Good to see you Aron.
Aron Levine:
All right, well, fantastic. We're going to jump right in with our first question. So Ken, last March, both you and your wife, Maddy, who co-founded Ave Wave with you, turned 70 and you did it while sheltering in place. So, talk about what reaching that milestone under those circumstances and how that might change the way you think about retirement or just how you're viewing the future.
Ken Dychtwald:
First, let me remind you that I got interested in the subject of aging and longevity, both as a psychologist and a gerontologist when I was in my early twenties. So, I was always the youngest guy in the room. And now all of a sudden I found myself, you know, being in the senior's category.
I must say that turning 70 during COVID was sobering, in a few ways. First of all, we felt a lot of gratitude. We've been living a pretty spectacular life. We have two kids we're crazy about, we've had a lot of good fortune in our careers and in our relationships. But also it's a reminder that the clock is ticking. You've only got so many years in front of you and it's important to do the things you want to do and you need to do and that you love the most in the time you've got in front of you.
Aron Levine:
So you just published a book called What Retirees Want. Very appropriate. So, maybe talk about what your research is showing about the pandemic and how it's changing just broadly, how it's changing people's attitudes and expectations about retirement.
Ken Dychtwald:
A lot of what drove me to wanting to do this book, it was my 17th actually, was the idea that when my kids, for example, were in high school and contemplating college, there was a lot of fuss and a lot of attention to give them proper thinking and ideas about what the next four years of life would be about. There were college counselors, you visited campuses, you thought about the military or work or small school, big school. And that was for four years.
And what struck me is that when we get to our sixties and we think about retiring, there's no orientation, there's no one good holistic book or guide to give you an idea of what all the possibilities might be.
Some of the changes that have happened during COVID; first of all, a lot of retirees during COVID have done pretty well because they haven't had their little kids at home, missing their friends. They haven't worried about losing their job because they don't have a job anymore.
And there are some safety nets that retirees have. You know, the average payout for social security last year per person was $18,000; and the market value of a Medicare policy is $12,000. (Sources: Social Security Administration Fact Sheet, 2019; "Slow Growth in Medicare and Medicaid Spending per Enrollee Has Implications for Policy Debates," Urban Institute and Robert Wood Johnson Foundation, Feb. 2019). So those safety nets are valuable and helpful and a lot of young people don't have anything like that.
And so, for many retirees, there was a chance to be resilient. There was a chance to have some fortitude. And since a lot of America's retirees have been through good times, bad times, life, death, they had perspective. So in an interesting way, retirees have stood up taller than ever before in terms of being the elders of their families and their communities and I think that's a good thing.
Aron Levine:
Yeah, no question about it. You know, and I think about one of the biggest decisions people have is where they're going to live in retirement. The question for you is, are more people now leaning towards staying in their homes, given what's going on? Or are they still thinking about moving to assisted living or retirement communities? You know, does the rise in remote work kind of create some different opportunities? Talk about living in — and the thoughts about that, for people who are about to retire.
Ken Dychtwald:
Yeah. A couple of things. First, some people are thinking, as a result of COVID, they want to retire earlier than they were expecting beforehand.
GRAPHIC:
How We're Rethinking Retirement
  • Leaving the workforce earlier
It's like, who needs to work? Work is uncertain. I want to have time with my loved ones. I want to go fishing. I want to sleep late. I want to write a book of poems. We heard a lot of talk about freedom in our research. That people talk about freedom from. "It would be nice to be in a place in my life where I don't have to answer to a boss, where I don't have to get up early in the morning, or I don't have to travel places."
And also freedom too. There might be that one vacation you're hoping still to take when travel returns. or you'd like to write a book of poems, or you want to go out and coach a high school basketball team. Freedom becomes a big word that today's retirees are thinking about.
GRAPHIC:
How We're Rethinking Retirement
  • Leaving the workforce earlier
  • Downsizing to a smaller home
Also, when it comes to housing, people have rethought some of their housing decisions. A lot of people are thinking that they might have too much home; and there's a huge amount of asset tied up in home equity. Today's retired population, about 70% owned their homes, almost 70% of which are paid off. (Source: Age Wave calculation from U.S. Census Bureau, American Communities Survey, 2018).
GRAPHIC:
How We're Rethinking Retirement
  • Leaving the workforce earlier
  • Downsizing to a smaller home
  • Moving to a new community
So some people are thinking, you know, "I might move. I don't want to necessarily move to assisted living at this moment, but I might move to a place closer to the grandkids or into a community, maybe a college town where I can have some more fun and not be so isolated."
And also there was a futuristic television show back in the 1980s. It wasn't the Jetsons. It was the Golden Girls that suggested an example. Because here you have four women choosing to live together.
GRAPHIC:
How We're Rethinking Retirement
  • Leaving the workforce earlier
  • Downsizing to a smaller home
  • Moving to a new community
  • Living with friends or family
Some people are thinking, you know, "Why live alone? Why be so independent? Maybe if we live with our kids or with friends, we can have someone to look after us and someone to share the good times."
And so, people are thinking about how do they remodel their lives to stay in the home of their choosing? And that might mean downsizing or it mean it might mean relocating. And some people are even thinking of relocating to a lesser expensive region, maybe where there's no state tax, or maybe within… get more house for less dollars, in order to have their retirement more secure and go the distance with help.
Aron Levine:
Now, one of the things you brought up is freedom. And of course, financial freedom is such a critical component. And clearly your research shows that really many Americans underestimate the costs of living in retirement.
Ken Dychtwald:
Yeah. You bring up a really important point. Previous generations, first of all, didn't have too much of a life in retirement. They weren't going to live that long; three, four, seven years.
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Average U.S. life expectancy for a 65 year old today is almost
20 additional years; and is longer for women than men.
Source: National Center for Health Statistics, National Vital Statistics, 2020
Today, the life expectancy for a 65 year old in America is almost 20 more years; and for women it's longer than men. And so living 20 or 25 years, and if there's further breakthroughs in medicine or healthcare might even be 30 years in retirement, that requires a lot of funding preparation. Unfortunately about 80% of the American public has not done much planning for their retirement. (Source: Merrill Lynch/Age Wave, "Finances in Retirement: New Challenges, New Solutions," 2017.) They've been kind of winging it and just keeping their fingers crossed things will turn out fine.
We've also heard from our research, frankly, a lot of research we did in partnership with Bank of America, is that people don't want to ever be a burden on their family. They want to be able to be generous to their kids and grandkids, but they don't want to be a burden on them. And so that requires smart planning. Might require a little more frugal spending. It might require a little bit extra work. But it certainly requires having a plan that makes sure you can go the distance without worrying about things or without having it all fall apart in the last five years of your life.
Aron Levine:
Yeah, thanks Ken. And you know, you've really hit a lot on retirement specifically. I want to maybe step back, you have great expertise on just the broader topic of aging and maybe what do you believe are we not well-prepared for maybe, just broadly on the issue of aging?
Ken Dychtwald:
I think there's a few things, Aron, and let me break them down. One of them is we've witnessed a digital divide. Before COVID, 62% of the over 75 population were on the Internet and the rest were not. (Source: Pew Research Center, 2019.) And only about a quarter of the older population felt comfortable with interactive media like we're doing today. (Source: Pew Research Center, 2017.)
GRAPHIC:
Improving Life as We Age
  • Closing the "digital divide"
And so we've got to really fix that because it can be a matter of life and death. We've got to make digital not just something that young people do who enjoy TikTok, but all generations are competent at and are comfortable with.
GRAPHIC:
Improving Life as We Age
  • Closing the "digital divide"
  • Living healthier for longer
Second, we've done a really bad job of matching our health span to our lifespan. We often think, "Oh, it's a big deal if you can live 80 or 90 years." But what's more important is how many of those years are you healthy and independent and feeling able to live a good life. In the United States, we have about 10 years short our health span compared to our lifespan. And so that means 10 years' worth of illness, 10 years' worth of pain, 10 years' worth of expensive costs. Not good for the country, not good for the family, not good for the individual.
One of the biggest problems in there is cognitive health. Alzheimer's and related dementias are very pervasive among our elder population. And we haven't yet invested the amount of dollars in science and preventative intelligence to be able to do away with that disease. Alzheimer's and related dementias could be the next major pandemic.
GRAPHIC:
Improving Life as We Age
  • Closing the "digital divide"
  • Living healthier for longer
  • Achieving greater financial security
Third, and you hit on it earlier, I don't think we've thought enough about how we're going to fund longer lived men and women. And I don't mean just Social Security and just pensions, but families and individuals. Have we really talked enough about what it takes to live a long life in terms of all the dollars it requires to live well with security?
And I'll give you one of the, one of the juxtapositions we saw during COVID, is that a lot of people near or in retirement were helping to fund their adult children's lives. So there's enormous amount of let's call it "generational generosity." But if that's going to put your own financial future in jeopardy, you need some time to think through what the boundaries would be so that you can be sure to go the distance.
But I'll tell you, there's one more that's just as important and that's purpose. There's been so much attention about everybody wanting to be youthful. I think we might do well if we also thought about how we can be useful.
GRAPHIC:
Improving Life as We Age
  • Closing the "digital divide"
  • Living healthier for longer
  • Achieving greater financial security
  • Finding renewed purpose
I think to give more purpose to our elders, to have them be more involved in the community and the colleges and mentoring young people, in going back to school themselves, or starting new careers or being entrepreneurs. If we could create a more purposeful maturity, I think that retirement for many people would be more enriched and more contributory. And that would be good for everyone.
Aron Levine:
One of the things I love as I talk to you and I always talk to you, I love how optimistic you always are at the end of the day. So maybe talk a little about, you know, despite all those challenges, why is now such a good time for a retiree and how is it going to keep getting better?
Ken Dychtwald:
I've always been a believer that you can… you have some choice over how you want to look at things. And when COVID came down on us, it was clearly, the whole world was in a near-death experience. You know, somebody you love might die or you might die, or certainly the life we have all been living ended. And maybe it'll return to normal. But some people were viewing this as kind of the Chicken Little story, you know, the sky is falling. Other people were viewing this as a Humpty Dumpty story. You know, we've fallen into a million pieces and we'll never come back together again.
I chose to view it as the caterpillar turning into a butterfly story, that we all have been given this last year to stop, think about what matters, think about what we're doing that might not be up to par. Are we spending time doing things that are a waste of time? Shouldn't we be devoting ourselves more to being the best version of ourselves? And that doesn't necessarily mean having to volunteer 50 hours a week, but maybe being a little kinder to people in your community. Maybe it means being a little more outgoing and helpful to a neighbor who's living alone.
I'm a big believer in the American psyche and in the American character. And what I've seen in 30 years of studies is that we're generous people, we're caring people. And I think that this COVID has challenged us to be even better than we've been in those ways. And I'm going to choose the idea that when we come out of this, we're not just going to be crankier or more angry at everybody. We're going to choose to come out and be more like a butterfly coming away from the caterpillar. That we'll be better versions of ourselves.
Aron Levine:
Ken, as a final question, this whole idea of useful rather than youthful and focusing on being useful. So maybe expand a little on that. And I guess also for you, who's now written I think you said 17 books. You've been an expert in talking about this topic for so many years. What do you hope your legacy to be for all the work you've done and how do people hopefully benefit from it in the long term?
Ken Dychtwald:
What I'm hoping for in the years to come is that we think of maturity and longevity not simply as having lots of free time, but taking some of that time to contribute back of ourselves, our wisdom, our skills, our resources and our, maybe some of the lessons we've learned in our life. Some people say that at the end of your life, you have two resumes, your career resume: What did you do? How much money do you make, how big your house was. And the other was your eulogy resume, who people said you were as a human being. And I think that's the more important one.
So I guess I'd like to be remembered for not only trying to be the Paul Revere of the longevity revolution, you know, telling people for 50 years that the aging are coming. But also that I tried my best to do good for others; that I gave it all I had. I think at the end of the day, I'd more like to be remembered as a guy who cared about his family and was cared about by them than just the work I did.
Aron Levine:
Ken, that's a great note to end on and I thank you so much for joining me and sharing your amazing perspectives. It's certainly given myself and everyone a lot to think about. So thanks so much.
Ken Dychtwald:
You too stay safe, stay well.
Aron Levine:
Okay. So, now we're going to turn things over to Lorna Sabbia, head of Retirement and Personal Wealth Solutions at Bank of America. She'll be speaking with two of our top experts on investing and retirement for thoughts on what you can do now to prepare for these new retirement realities.
Over to you, Lorna!
Lorna Sabbia:
Thank you, Aron and Ken, thank you. That was a really great discussion.
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Lorna Sabbia
Head of Retirement & Personal Wealth Solutions
Bank of America
There's so much to look forward to and also a lot to think about and prepare for, which is what exactly we'll be focusing on now. So joining me today to share some practical ideas to help you get ready for all of these new retirement realities are Chris Hyzy, our Chief Investment Officer for Merrill and Bank of America Private Bank.
Chris Hyzy:
Hello Lorna.
Lorna Sabbia:
Hey Chris. And also joining us is Surya Kolluri, who heads our retirement thought leadership at Bank of America.
Surya Kolluri:
Hi Lorna.
Lorna Sabbia:
Hey Surya. So Surya, let's start with you. You've been keeping tabs on all of the latest research on how the pandemic has changed retirement expectations. How would you advise somebody who's wondering whether they need to rethink their retirement plans and would the advice be different for a younger person who has more time to save and prepare?
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Surya Kolluri
Head of Retirement Thought Leadership
Bank of America
Surya Kolluri:
On the research side, we've been looking at the data over the past year and it wouldn't be surprising if I report that people's financial wellness, feelings of financial wellness has been going down. And when we look deeper into the data, a couple of surprises popped up.
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Only 14% of Generation X feel confident about saving for
current and future healthcare costs.
Source: Bank of America 2020 Workplace Benefits Report
One was what the Gen X reported. So Gen X is the generation born in 1965 through 1980, that window. They reported not feeling confident about savings for their health care in their retirement years. Only 14% express confidence on that count.
And then in the Millennial generation, those born after 1980 through, let's say 1996, that window, not surprisingly, their issue is debt, in particular student debt.
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Less than 30% of Millennials feel confident they can
pay back their student loan debt.
Source: AgingWell Hub, Georgetown University's McDonough School of Business, Nov. 17, 2020
And only 30% express confidence that they will be able to pay that off in preparation for retirement.
Now, the second part of your question in terms of rethinking retirement and revisiting it, I would suggest one, first setting the narrative of one's retirement, which is taking into account life priorities.
GRAPHIC:
Rethinking Your Retirement
  • Home
  • Health
  • Charitable contributions
  • Life expectancy
  • Future healthcare costs
  • Long-term care
Such as home, such as health, such as charitable contributions. So, set that narrative and then address some fundamental factors. Those include life expectancy, healthcare cost projections and also the need for long-term care. All those put together could be the beginning of a conversation in setting up, setting up one's retirement roadmap.
Lorna Sabbia:
That's great. And how about someone that's facing an earlier than expected retirement? What could they consider doing?
Surya Kolluri:
Firstly, I would suggest doing a portfolio stress test to …
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#1 – Consider doing a "stress test" on your portfolio to identify any imbalances in your cash flow.
Particularly from a cash flow perspective, what's coming in, what's going out, what's in balance. I'm sure Chris would agree with this point.
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#2 – Think about the potential impact of rising healthcare costs and future long-term care.
Secondly, I would also think about healthcare costs, which is how are healthcare costs going to inflate; at what point does long-term care kick in? That will be a second thought I would have.
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#3 – Seek out advice on when to file for Social Security benefits.
And third, thinking about Social Security, getting some advice on when to file for Social Security income and thinking about that. That fits one's personal and one's family's circumstance.
And also thinking about life expectancy. So, one of the things that I would suggest is not just go with averages. Let me give you an example:
GRAPHIC:
Consider Your Potential Life Expectancy
  • For a couple, both age 65:
    • 50% chance one of them will live to 92
    • 25% chance one of them will live to 97
Source: Bank of America / Merrill Lynch Chief Investment Office, "Tackling Retirement Risks," Spring 2020
Let's take a 65-year old, healthy couple. The chances that one of the two spouses would live to age 92 is 50%. The chances that one of the two spouses might live to age 97 is 25%. So, thinking about longevity in this new way is going to be important.
So, Lorna, those would be some of the steps I would recommend.
Lorna Sabbia:
That's really helpful, Surya, thank you so much. Chris, let's go to you from an investment perspective. One of the key questions retirees have is where to look for income, of course, and with interest rates at such low levels at this point, it's a real challenge, obviously.
What do you recommend people nearing and in retirement consider doing now?
Chris Hyzy:
Well, Lorna, it's yet again another challenge, right? We have to deal with low interest rates.
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Chris Hyzy
Chief Investment Officer
Merrill and Bank of America Private Bank
We have to do with what is perceived or real high market volatility. And Surya talked about this already — financial roadmap, the statistics around financial wellness. And even though interest rates have backed up recently, they're still at secularly low levels and expected to be below what we've seen during other life cycles.
So, if that's the case, which we do believe, then how do you deal with those low interest rates? Well, there's a couple of questions you have to ask yourself within your financial roadmap. First and foremost, can you accept more risk?
GRAPHIC:
Dealing with Low Interest Rates
  • Consider less exposure to fixed income (or bonds)
  • And more exposure to areas like:
    • Preferred securities
    • Equities (or stocks)
And if you can accept more risk because your life expectancy is longer and your investment life cycle is longer, than you should consider having less of an exposure to fixed income and actually moving down in the cap spectrum. Said it simply, move down to preferreds from credit or bonds in general; or move over into equities.
Now, what we expect in the next 10 to 20 years is, there's a pool that we all know very well. It's called the Gen Z pool and the Gen Y pool. And those two collectively are somewhere around 160 million people. So we think there's two big trends going on. Even though interest rates are low, you have a pool of people building an equity culture again. So there's likely to be a significant rotation, lower in fixed income, higher in equities over the coming couple of decades, at least in the next decade, in our view.
GRAPHIC:
Dealing with Low Interest Rates
  • Consider less exposure to fixed income (or bonds)
  • And more exposure to areas like:
    • Preferred securities
    • Equities (or stocks)
    • Including dividend paying and dividend growth
Now with that, the retiree should consider, where the risk is appropriate, to actually increase risk more towards total return to pick up some dividend paying areas, dividend growth areas in equity that you traditionally would have received in the bond market, but simply have a harder challenge to do that now because of where rates are. So, it's a subtle shift up in risk, closer to dividend growing areas within the equity market, to make up for the potential for lost income in the bond market.
Lorna Sabbia:
That's really helpful. Let's keep going, because I think market volatility and inflation are two other big concerns. So, Chris, how can retirees and those approaching retirement manage those two risks as well?
Chris Hyzy:
When we look at market volatility, there's the long-term market volatility that tends to be muted. But take a snapshot on a day basis, week basis, month, quarter, it can be quite volatile.
GRAPHIC:
Managing Market Volatility
  • Increase your diversification across asset classes:
    • Equities
    • Fixed income
    • Real estate and other areas
  • Have a disciplined plan for:
    • Asset allocation
    • Rebalancing
Number one, increase diversification. That's diversification across asset classes: equities, fixed income, real estate, other solutions that help mitigate volatility overall.
Have a defined plan. And that plan is about your target asset allocation, but it's also about your rebalancing plan. When markets get very volatile, it's important to have a disciplined plan on how to rebalance and when to do it when the markets give you that opportunity. To rebalance areas up that have underperformed and take profits in areas on a rebalancing basis that have outperformed.
The other way to consider this is not just to look at your traditional equity versus fixed income standard asset allocation. You have to look within those areas: "How do I want to be exposed and positioned within equities? Do I want to have more allocated to dividend growth areas because of the lower interest rates in the bond market? Do I want to take a little bit more risk in bonds in terms of credit, versus Treasury yields; how do I want to deal with that?"
And last but not least, as it relates to inflation, with the significant amount of fiscal stimulus out there, the potential for higher inflation is coming. Question is, how do you mitigate some of that higher inflation?
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Consider some exposure to areas that could
benefit from a gradual rise in inflation.
And that's having more exposure to inflation beneficiaries; areas like real estate perhaps; areas within the equity market that'll benefit from a steeper yield curve. Areas that also could potentially benefit from a solid core balance sheet in issuing higher dividends in the future.
So those are areas that we would consider to help mitigate against volatility and potential for a rise in inflation.
Lorna Sabbia:
That's great. That's a lot of action packed ideas. So thank you for that, Chris.
I want to take a moment and switch gears for just a second and focus on gender. We know that women have been disproportionately affected by the pandemic. Many have lost their jobs, or they themselves have taken a career break to manage things like homeschooling and caregiving. And that's certainly cutting into their retirement readiness in a big way.
And when you take a step back and you look beyond the pandemic, we know that women live longer than their male counterparts. Oftentimes they are retiring on average five years earlier. We know that there's still a pay gap. And as we talked about, even before the pandemic, the topic of caregiving is a female topic. So, I want to talk about some of the steps women should consider taking now to pursue greater security in retirement.
So, Surya, let me start with you.
Surya Kolluri:
Lorna, thank you. I was reflecting on the pay gap point you were making. And in our Women and Wellness study, when we traced the financial life journey between males and females,
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A woman at retirement age may have earned
a cumulative $1,055,000 less than a man,
due to the "pay gap" and work interruptions.
Source: Merrill Lynch/Age Wave, "Women & Financial Wellness: Beyond the Bottom Line," March 2018
… the "aha" that we discovered in that study is that the million dollar difference at the end of the financial life journey, when somebody gets to retirement, between females and males, disadvantaged to the female as they're going through their financial life journeys.
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Women's #1 financial regret was not investing
more of their money earlier.
Source: Merrill Lynch/Age Wave, "Women & Financial Wellness: Beyond the Bottom Line," March 2018
And both of us, when we looked at the research findings were surprised to see that female investors expressed their single biggest regret, which was not investing soon enough.
GRAPHIC #6:
Women & Financial Security
  • Start investing early
  • Consider your comfort with risk and your retirement goals
  • If offered, maximize your contributions to your employer's retirement plan
So, step number one is getting comfortable investing earlier. Secondly, as Chris pointed out in his remarks earlier, thinking about the portfolio and making sure it reflects one's risk propensity and what one wants to accomplish in their retirement as well. Thirdly, if one is, for example, working and contributing to a retirement plan, like a 401(k) or a 403(b), you know some plan like that, making sure that, if possible, maximizing it so the matching contributions are taken advantage of and no money is left on the table.
And then finally, in your remarks you made the point about caregiving; maybe for an elder in the family, caregiving for maybe a spouse, long-term care expenses, et cetera. And I think of these, Lorna, as financial puzzle pieces that we should put on the table in conversation with advisors and say, "Hey, where does the push and pull between these pieces so that we can lay out a logical plan?"
Lorna Sabbia:
Great, thanks, Surya. Chris, I want to get your perspective as well. What steps would you advise women should consider in pursuing their own security in retirement?
Chris Hyzy:
I'm going to emphasize that point that Surya just made, which is start early and that goes for all investors, especially for women because the challenges that women face are going up every single day. That increases stress and that can create latency as it relates to starting investing for the future.
So, start now, have a plan. The power of compounding works in your favor the earlier you start with a longer-term time horizon, by having a well-thought-out plan that works hand in glove with your objectives.
Lorna Sabbia:
Surya, on another note, there tends to be a general concern about the viability of both Social Security and Medicare. Do you see any potential policy solutions on the horizons and what steps should clients be taking in the meantime?
Surya Kolluri:
Indeed Lorna, you know, no surprise. This question comes up again and again and again. Let's just take a quick historical perspective. And when we take a historical perspective we will conclude that changes have been made to the system.
So, for example, in the 1950s for Social Security, a cost-of-living adjustment was made. We call it, refer to it as COLA. And then in the fifties and the sixties, the retirement age for females first and males next was brought down to 62 with a commensurate reduction in benefits. And as recently as 2016, Lorna, as we know, there was a very popular option in Social Security called "file and suspend" and that was revised.
So, if you look historically, policy makers do make changes. And from the best we can tell in the short term, given the focus on pandemic, given the focus on economic relief, it is unlikely in the very near term that changes are going to be made. So, what we should be doing is thinking about the, what the law provides, what the constraints are and try to come up with a good retirement plan that includes Medicare, that includes Social Security as we go forward.
Lorna Sabbia:
Excellent. You know, even with Medicare, out of pocket healthcare costs at age 65 average nearly $7,000 per year and some 70% of people over the age of 65 will require long-term care at some point. (Sources: HealthView, projections as of 2020; U.S. Department of Health & Human Services, National Clearinghouse for Long-Term Care Information, October 2017.)
So, Surya, are there ways that people can prepare for those types of expenses?
Surya Kolluri:
Very much Lorna. Let's take Medicare.
GRAPHIC:
Understanding Medicare:
  • Part A (hospital insurance)
  • Part B (medical insurance)
    (Aka "Original Medicare")
  • Part C (private plans approved by Medicare)
  • Part D (prescription drug coverage)
  • Medigap (supplemental insurance)
Source: U.S. Department of Health & Human Service
There's Part A and Part B, hospital and medical coverage. And those two together, part A and part B together, are called the "Original Medicare." Then there's part C, then there's part D, which is prescription coverage. And then there's Medigap. So, there's a lot going on with Medicare, just awareness and education and clarification on what Medicare is and how it works.
LOWER 3RD
Medicare, on average, only covers 67% of healthcare costs
for people in retirement. 33% is funded out of pocket.
Source: Medpac, June 2019 Data Book: Health Care Spending and the Medicare Program
And so, for example, your point you made about the costs that a family might incur, Medicare only covers 67% of what is needed. So, there's 33% out of pocket that one needs to consider in their retirement planning.
So thinking about that and thinking about when to file for Social Security and what impact does that have in terms of income, in terms of taxes, in terms of flowing into paying for the supplemental insurance, all becomes very important. So one step is educating oneself. The second step is thinking about how these parts interact with each other. And then third, thinking about how Social Security and Medicare go hand in hand.
Lorna Sabbia:
That's great. You know, we've talked about a lot, we've talked about a lot of risks and challenges. I have a final question for Chris, are you optimistic about the future of retirement?
Chris Hyzy:
Lorna, I'm more optimistic today than any time in the most recent past. And there's a lot of reasons for that. And first and foremost, just take a look at the economy and the cycle we're in right now as we head towards full reopening. But most importantly, thinking out over the next decade, two decades. This giant economy in the United States and around the world is ever increasingly becoming digital, that's number one.
Number two, innovation is taking over not just in technology, but across all sectors, as it relates to what is driving growth out there. And that has a lot of good implications, in our opinion, for investors. We have a cohort out there, as we've mentioned before, collectively between Gen Z and Gen Y that are now just becoming investors for the first time and beginning to invest for the long haul. We believe we are at the footsteps of a multi-decade long bull market. That's the big reason why I'm so optimistic.
Secondly, there's a bull market for overall advice, the convergence between life advice and financial advice. And those two converge directly at the footsteps when people are beginning to think about retirement and through retirement. That's why I'm mostly optimistic.
Lorna Sabbia:
That's I think a perfect note to end on. Chris and Surya, those were really some helpful and thoughtful insights that you shared. I know it's a conversation that we're going to continue 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 as you plan for and live the life that you want in retirement.
Thanks again, everyone.
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Aron Levine, President, Preferred and Consumer Banking & Investments, Bank of America, sits down with one of the nation's pre-eminent experts on retirement, Age Wave co-founder Ken Dychtwald, for a conversation on how the pandemic has changed retirement.
Then expert panelists — Lorna Sabbia, Chris Hyzy, and Surya Kolluri — discuss the ways you can prepare for the new realities ahead.

Topic areas include:

  • What emerging trends may mean for you as you plan for retirement
  • Retiring earlier than expected — or working longer remotely
  • Technology advancements driving longevity and increased quality of life in retirement
  • The impact of the pandemic on women's retirement security
  • The finances of staying in your home versus moving as you age
  • The future of Social Security and Medicare
  • Investing strategies to consider when you are nearing or in retirement

Our host:

Aron Levine
Aron Levine
President, Preferred and Consumer
Banking Investments at Bank of
America

Featured speaker:

Ken Dychtwald
Ken Dychtwald
Co-founder, Age Wave

Expert panelists:

Lorna Sabbia
Lorna Sabbia
Head of Retirement and Personal
Wealth Solutions, Bank of America
Chris Hyzy
Chris Hyzy
Chief Investment Officer, Merrill and
Bank of America Private Bank
Surya Kolluri
Surya Kolluri
Managing Director, Retirement
Thought Leadership, Bank
of America
Next steps

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.

The Chief Investment Office (CIO) provides thought leadership on wealth management, investment strategy and global markets; portfolio management solutions; due diligence; and solutions oversight and data analytics. CIO viewpoints are developed for Bank of America Private Bank, a division of Bank of America, N.A., ("Bank of America") and Merrill Lynch, Pierce, Fenner & Smith Incorporated ("MLPF&S" or "Merrill"), a registered broker-dealer, registered investment adviser and a wholly owned subsidiary of Bank of America Corporation ("BofA Corp.").
BofA Global Research is research produced by BofA Securities, Inc. ("BofAS") and/or one or more of its affiliates. BofAS is a registered broker-dealer, Member SIPC popup, and wholly owned subsidiary of Bank of America Corporation ("BofA Corp.").
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