Bank of America Research on Aging and Longevity August 2015

Disclosures

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Are Not FDIC Insured Are Not Bank Guaranteed May Lose Value

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Source: The Atlantic, October 2014 Issue

Health Care Improvements Keep Lowering the Death Rate

4

Source: Age Wave, 2014 Timeline

Increased Longevity Is a Recent, Major Demographic Shift

38

47

78

0

20

40

60

80

100

120

1800 1900 2000 2100

Source: U.S. Census Bureau, 2010

Years

5

The Last Two Centuries Have Seen a Doubling of the Average Lifespan…

…Which Is an Exponential Change in the Context of Overall Human Experience

0

10

20

30

40

50

60

70

80

90

100,000 BC 50,000 BC 2000 AD

Years

100+?

Aging Population Is A Global Phenomenon

Source: Nehal, Sarbjit and Beijia Ma, "The Silver Dollar - Longevity Revolution," Merrill Lynch Global Research, June 2014, p.3

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Percent of Population Age 65+ in 2050 Percent of Population Age 65+ in 2010

Less than 5% 5% to 10% 10% to 15% 15% to 20% Greater than 20% No Data

Aging Baby Boomers Supercharge the Longevity Revolution Change in U.S. Population Growth

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Source: US Census Bureau, 2010

-11%

20%

49%

11% -2%

17% 27% 1970 - 1980

7% 8% 7% -10% 3%

73%

54%

2000 - 2020

4% -13% 16%

47%

11% -3%

22% 1980 - 1990

1990 - 2000 12% 7% -8%

20%

49%

15% 12%

Under 15 15-24 25-34 35-44 45-54 55-64 65+

Under 15 15-24 25-34 35-44 45-54 55-64 65+

Under 15 15-24 25-34 35-44 45-54 55-64 65+

Longevity and Aging Boomers are Reshaping American Society

Source: Dychtwald, Ken, "How the AGE WAVE will Transform the Marketplace, the Workplace, and Our Lives," Age Wave, April 2014, pp. 50, 55-59

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Population by Age and Sex, 1970 Population by Age and Sex, 2030

re•tire•ment (noun) |riˈtīrmənt|

: The action or fact of leaving one's job and

ceasing to work

: To disappear, to go away, to withdraw

From… … To

Retirement is Being Redefined and Transforming the World

Source: Webster's New Twentieth Century Dictionary, published 1951

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28%

35%

33%

5% Full-time work

Cycle between work and leisure

Never work for pay again

Part-time work

72% of pre-retirees

want to work in some form

during retirement

Work Has Become an Essential Idea of Retirement

Source: Merrill Lynch/Age Wave “New Retirement Wildcards” Survey, 2013, General Population Pre-Retirees Aged 50+ and Working Retirees Aged 50+

10 10

Ideal Plan to Balance Work in Retirement for Pre-Retirees

Majority of Retirees Choose to Work, Across Wealth Levels

“Which one of the following represents your ideal plan for how you would like to balance work and leisure in retirement?”

“I work in retirement because I have to”

“I work in retirement because I want to”

62%

82%

96%

38%

18%

4%

Under $50K $100K to under $250K

$1M to under $5M

Source: Dychtwald, Ken, "How the AGE WAVE will Transform the Marketplace, the Workplace, and Our Lives," Age Wave, April 2014, pp. 50, 55-59

Longevity Bonus is Driving a Re-Imagination of Lifecourse Alternating Work, Family, Education and Leisure Time

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0 10 20 30 40 50 60 70 80 90

Traditional Lifecourse

Longevity bonus

Age

Education Work and family Leisure

0 20 40 60 80 100

Modern Lifecourse (illustrative)

Age

0 10 20 30 40 50 60 70 80 90 Education Leisure Work and family

Gap year

Grad school

Sabbatical

Retraining for second career

Traveling

Consulting and volunteerism

Getting new degree

Changing Family Dynamics Pose New Social and Financial Challenges for Boomers

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Source: Age Wave Study: Family

Family Then

Family Now

Multi-generational family poses challenges…

3 out of 5 people age 50+ today provide financial support to their parents and their adult children

‒ Many boomers become the “Family Bank”

Family support is unforeseen and unprepared

− 88% of age 50+ have never budgeted for financial support to family members

83% of age 50+ feel financially responsible for their parents

There is a dangerous lack of communication around financial planning in retirement for elderly parents

‒ 70% of boomers haven’t discussed with their parents where they live in retirement or how they pay for long-term care

Women are expecting to live longer and are more likely than men to worry about running out of money and being a burden to their families

Women in Particular Are Affected By Longevity

Source: MetLife Study of Women, Retirement, and the Extra-Long Life, Implications for Planning, September 2011, p.3 ; 65+ in the United States: 2010 US Census Bureau, p. 127-8

Expect to Live Longer than Men and Worry About Running Out of Money

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20%

39%

Men Women

% Expecting to Live to Age 90

2.6

11.3

Men (Widower)

Women (Widow)

4 out of 5 women will outlive their spouses

− 800,000 new widows every year

Number of US Widowers and Widows (millions)

2x

4x

A Massive “Silver Economy” is Emerging Globally Worth an Estimated $7T According to BAML Research

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Source: Ma, Beijia, "The Silver Dollar - Longevity Revolution," September 2014, p.13

Healthcare

Housing

Financial services Consumer goods 75+ year olds spend over 200% more on health care than the

population average

Average national rent for skilled nursing facilities is $8,000/month

Boomers dominate 94% of consumer packaged good

categories

20%+ expected increase in financial advisors

Pharma Average American aged 65-79 receives 27 prescriptions per

person/ year

It Is Challenging to Secure Retirement Income

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Source: US Department of Labor Employee Benefits Security Administration, Private Pension Plan Bulletin Historical Tables and Graphs, Dec 2014, Table E5: Number of Participants in Pension Plans by type of plan, 1975-2012; Dychtwald, Ken, "How the AGE WAVE will Transform the Marketplace, the Workplace, and Our Lives," Age Wave, April 2014, p.21

66%

50%

40%

32% 34%

50%

60%

68%

1980 1990 2000 2011

Defined Benefit Defined Contribution

Defined Benefit Plans Are Going Away… … While Social Security Burden Is Growing Exponentially

Percentage of Participants in DB and DC Plans 1940 2010

60 year CAGR

Population age 65+ (million)

9.0 38.6 2.5%

Workers to recipients ratio

42 to 1 2.9 to 1 N/A

Social Security recipients

22,488 54,031,968 13.9%

Average annual Social Security payout

$220 $12,892 7.0%

Total Social Security payout (M)

$49 $696,580 17.3%

% Federal budget for Social Security

0.04% 19% 10.8%

Healthcare Issues and Expenses Are the Retirement “Wild Card”

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Source: Alzheimer's Association, 2014 Alzheimer's Disease Facts and Figures, Alzheimer's & Dementia, Volume 10, Issue 2, p.54.; Longtermcare.gov; Hebert LE, Weuve J, Scherr PA, Evans DA, Alzheimer disease in the United States (2010-2050) estimated using the 2010 Census. Neurology 2013;80(19):1778–83; Center for Disease Control and Prevention, Alzheimer's Disease, July 2014 ; Alzheimer's Association, "Help Wipe Out Alzheimer's: Share the Facts," 2014; Fidelity Viewpoints, "Retiree health costs hold steady," June 2014; Ameriprise Financial, "4 Strategies to help you save enough for health care in retirement," 2015

Long Term Care Need and Cost Are Major Concern

30% Won’t

Need LTC 70%

Will Need LTC

Couples retiring at 65 will face average of $220-270,000 in health care costs during retirement

Currently, 5.2M Americans affected by Alzheimer’s, which without a break-through cure is expected to rise to 14M by 2050

Among top 10 causes of death in US, Alzheimer’s is currently the only one that cannot be prevented, cured or even slowed

2014 2050

Costs of Alzheimer’s Are Expected To Explode

% of Population 65+ yr Expecting To Need Long Term Care

$214B

$1,200B

~6x

Longevity Revolution Impact Across BAC Client Groups

People

Companies

Institutional Investors

Require help with securing sufficient retirement income streams and hedging increased longevity risk

Prepare for increased and unpredictable health care costs

Aspire to living their best life in retirement

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Concerned that employees are under-prepared for retirement

Seek talent opportunities with an aging labor pool

Struggle with Defined Benefits funding risks as they transition to Defined Contribution retirement plans

Adapt to changing customer demographics and utilize opportunities created by the $7T “Silver Economy”

Create longevity and mortality risk management products

Develop new set of retirement / lifetime income products

Distilled Client Insights into an Innovative Framework and Driving it Through Channels

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Listened to Clients Main Retirement Concerns in Consumer

Research…

… and Distilled What We Heard into an Innovative Framework