Research Explores Three Major Forces Redefining
Retirement Planning – Empowered Health Care Consumers, Potential
Rise in Chronic Disease, and the Cost of Longevity
New Merrill Lynch research, conducted in partnership with Age
Wave, finds that 81 percent of retirees cite health as the most
important ingredient to a happy retirement, followed by financial
security (58 percent), loving family and friends (36 percent), and
having purpose (20 percent).
The research explores three major forces that are redefining how
individuals plan for later life, including an empowered baby boomer
generation of health care consumers, the potential rise of chronic
disease due to longer life spans, and how longevity is causing
health and wealth to converge like never before. Based on a
nationally representative survey of 3,300 respondents, this
landmark study, “Health and Retirement: Planning for the Great
Unknown,” also examines the implications of health and health care
costs on quality of life in retirement. Among the key findings:
- Americans age 50+ cite health care
costs in retirement as their greatest financial concern, regardless
of their wealth level. Yet the vast majority of people have not
factored health care costs into their retirement planning.
- Seven out of 10 couples age 50+ have
not discussed how much they may need to save to pay for health care
during retirement.
- More than half of retirees retired
earlier than they expected, and the number one reason for their
early retirement was a health problem.
- People cite Alzheimer’s as the scariest
health condition of later life (54 percent), more than cancer,
strokes, heart disease, diabetes and arthritis combined.
- Just 19 percent of current Medicare
recipients feel they have a strong grasp of what health care costs
their Medicare options cover.
- Compared to their parents, baby boomers
are likely to dramatically reshape approaches to health care in the
years ahead.
- There is considerable enthusiasm
regarding the potential of scientific advancements. On average,
people age 50+ believe future medical innovations and technologies
could potentially add more than 10 years to their lives.
This study introduces the four “Boomer HealthStyles,” showing
certain types of people on a course for a healthy retirement and
others who may face challenges with their health and health care
costs. The new report offers strategies for a healthier and more
financially secure retirement, while also finding that lack of
personal preparation and the need for enhancements to the health
care system may present serious problems for America’s aging
population.
“As boomers move into their later years, health will be the
ultimate retirement wildcard,” said Andy Sieg, head of Global
Wealth and Retirement Solutions for Bank of America Merrill Lynch.
“For many, health can be the difference between a retirement of
opportunity and independence or one of worry and financial
challenges. This research makes clear that the convergence of
health and wealth should be factored into planning for later
life.”
Boomers reshaping approach to health
The study revealed that boomers are a whole new type of health
care consumer – one who takes charge of their health and health
care decisions. Compared to their parents’ generation, boomers are
2 1/2 times more likely to say they are proactive about their
health, including being four times more likely to actively research
health information. They are also far more likely to say they view
their doctors as partners who work with them to optimize their
health, as opposed to an authority who gives them a plan to follow.
Boomers are also highly optimistic about their health, with nearly
80 percent expecting their generation will be healthy and active at
the age of 75.
“As demanding consumers, boomers have redefined nearly every
life stage, and the way they approach health and health care will
be no different,” said Ken Dychtwald, Ph.D., founder and CEO of Age
Wave. “Boomers would be wise to boost investments in their health,
through healthy behaviors and lifestyle choices. At the same time,
the health care system needs to ensure it is prepared for the aging
of this generation – with the proper knowledge, skills, services
and science.”
Double threat of health challenges
The study found that, regardless of wealth level, health care
expenses rank as the most pressing financial concern in retirement
(41 percent), exceeding even the fear of outliving one’s money (29
percent). In fact, people age 50+ are nearly twice as worried about
the cost of retirement health care as they are about the actual
quality of care they might receive.
“Health challenges can be a double threat to retirement
financial security,” said David Tyrie, head of Retirement and
Personal Wealth Solutions for Bank of America Merrill Lynch.
“Between unpredictable and costly health care expenses and
unexpected early retirement due to health problems, planning ahead
can be confusing and overwhelming. People are increasingly seeking
guidance to help them make informed decisions, for themselves and
their families.”
The majority of retirees surveyed (55 percent) retired earlier
than they had expected, while 38 percent retired when they planned
to, and just 7 percent later than they expected. Although early
retirement has often been equated with financial success, today’s
retirees age 50+ cite health problems as the top reason (37
percent).
According to the study, people are more concerned about the
financial impact of a spouse’s serious illness (66 percent) than
they are about their own illness (62 percent). Women, who are
likely to live longer and more apt to spend down savings on their
spouse’s health care, are even more concerned than men (70 percent
vs. 62 percent) about the financial impact of their spouse
developing a serious health problem. The study also finds that many
people age 50+ anticipate they would help other family members
facing health problems and health care costs. This may be one
reason why people’s concerns about how to plan for health care
costs include potential health problems of their children (50
percent), parents (32 percent) and siblings (29 percent).
Alzheimer’s: The most worrisome disease of later life
Increasing life expectancy coupled with the aging of the large
boomer generation will potentially give rise to growing numbers of
older adults confronting chronic diseases, such as hypertension,
heart disease, diabetes, cancer, Alzheimer’s and arthritis.
While many chronic diseases can disrupt health and wealth in
retirement, the study revealed that, across all generations, more
people cite Alzheimer's as the disease about which they are most
worried. The disease – for which there currently is no cure – can
impact not just individuals but also their families, requiring
years of caregiving and financial help. When asked what concerns
them most about Alzheimer’s, people cited becoming a burden on
their family (78 percent) and loss of dignity (56 percent).
The vast majority of survey respondents across all generations
expressed overwhelming interest and enthusiasm in a wide range of
potential innovations and new medical technologies to help them age
with greater health and vitality. At the top of the list is
“therapies to slow down the aging of the brain.” Among several
other potential innovations of great interest to people, as
revealed through the study, are technologies that would allow them
to grow and replace their own organs, wearable microsensors to help
manage their health, and genetic analysis that can predict diseases
for which they are at risk.
Confidence, knowledge and communication gaps
Unfortunately, most retirement planning today does not factor in
the cost of health care. Fewer than one out of six pre-retirees age
50+ has attempted to forecast how much they may need to cover
health care or long-term care expenses in retirement. Many
pre-retirees surveyed say the information available to them when
trying to determine how much they might need – and how best to
prepare for and insure against these costs – is overwhelming (54
percent), confusing (49 percent) or frustrating (36 percent).
Furthermore, the vast majority simply don’t understand Medicare,
with a mere 7 percent of people ages 55 to 64 citing a strong grasp
of Medicare coverage options. Even among actual Medicare
recipients, fewer than one out of five (19 percent) say they have
ample knowledge about Medicare options.
A lack of communication about health care costs is perhaps the
greatest barrier to effective planning. According to married
pre-retirees age 50+, seven out of 10 have not had a discussion
with their spouse about how much should be saved to pay for health
care during retirement, or about how to pay for any long-term care
that might be necessary. The report suggests five critical
conversations couples or families should have to help effectively
prepare for retirement health care.
Four boomer HealthStyles
The study also explores different approaches boomers take to
managing their health and planning for health care costs, defining
for the first time their four unique retirement HealthStyles,
including:
1. Healthy and Proactive (29 percent) individuals who take
charge of their health care and related finances. They are the most
actively engaged in healthy behaviors such as exercise and eating
well, have the most positive attitude about their health and also
feel well-prepared for health care costs in retirement.
2. Lucky but Lax (10 percent) individuals who have been
fortunate to be relatively healthy so far, but exhibit little
interest in taking care of themselves or planning for future health
care costs, leaving them vulnerable to future, unexpected health
disruptions.
3. Course-correcting and Motivated (29 percent) individuals who
have experienced a health “wake-up call,” such as an illness or
diagnosis, and are now trying to improve their health by seeking
out information and tools, as well as adopting healthier
behaviors.
4. Challenged and Concerned (32 percent) individuals who are
struggling with health difficulties, yet many are not actively
taking good care of their health. They are the most worried about
the impact of illness on their finances, and feel overwhelmed and
confused.
To download “Health and Retirement: Planning for the Great
Unknown,” visit www.ml.com/retirementstudy. This report is the
fourth in a series of in-depth studies focusing on seven life
priorities, as defined through the new Merrill Lynch Clear program.
Merrill Lynch Clear is a pioneering framework designed to connect
people’s lives to their finances and help them live their best life
in retirement. To explore additional content and resources related
to these seven life priorities, visit www.ml.com/retire.
Age WaveAge Wave is the nation’s foremost thought leader on
population aging and its profound business, social, healthcare,
financial, workforce and cultural implications. Under the
leadership of founder and CEO Dr. Ken Dychtwald, Age Wave has
developed a unique understanding of the body, mind, hopes and
demands of new generations of maturing consumers and workers and
their expectations, attitudes, hopes, and fears regarding
retirement. Since its inception in 1986, the firm has provided
breakthrough research, compelling presentations, award-winning
communications, education and training systems and results-driven
marketing and consulting initiatives to over half the Fortune 500.
For more information, please visit www.agewave.com. Age Wave is not
affiliated with Bank of America Corporation.
Merrill Lynch Global Wealth ManagementMerrill Lynch Global
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With over 13,845 Financial Advisors and $2 trillion in client
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These clients are served by more than 170 Private Wealth Advisor
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is part of Bank of America Corporation.
*Source: Bank of America. Merrill Lynch Global Wealth Management
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wealth and investment management division including Merrill Lynch
Wealth Management (North America and International), Merrill Lynch
Trust Company, and Private Banking and Investment Group. As of June
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balances. Client Balances consists of the following assets of
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This material should be regarded as general information on
health care considerations and is not intended to provide specific
health care advice. If you have questions regarding your particular
situation, please contact your legal or tax advisor.
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