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Allianz Life Insurance Company of North America Allianz Life Insurance Company of New York Rising health care costs Is your retirement income keeping up? Presented by [Producer Name] [Producer Title] [Producer Company] AMK-346 -N (R-1/2019)

Please note [Producer name, producer company name] is not an employee of Allianz Life Insurance Company of North America (Allianz), Allianz Life Insurance Company of New York (Allianz Life® of NY), or their subsidiaries or affiliated companies. This material is prepared by Allianz Life Insurance Company of North America and its affiliate Allianz Life Insurance Company of New York for use by financial professionals. This material is prepared by Allianz Life Insurance Company of North America (Allianz) and its affiliate Allianz Life Insurance of New York (Allianz Life® of NY) for use by its financial professionals. 2

Before we begin This content is for general informational purposes only. It is not intended to provide fiduciary, tax, or legal advice and cannot be used to avoid tax penalties; nor is it intended to market, promote, or recommend any tax plan or arrangement. Allianz Life Insurance Company of North America, Allianz Life Insurance Company of New York, their affiliates, and their employees and representatives do not give legal or tax advice or advice related to health care or Medicare. Clients are encouraged to consult with their own legal, tax, and financial professionals for specific advice or product recommendations regarding their particular situation. Allianz, Allianz Life of NY, and Allianz Life Financial Services, LLC are affiliated companies. • Not FDIC insured • May lose value • No bank or credit union guarantee • Not a deposit • Not insured by any federal government agency or NCUA/NCUSIF 3

The cost of health care in retirement is concerning $3. 5 trillion national health spending in 2017 5. 5% projected annual growth in health care spending from 2017 - 2026 Centers for Medicare and Medicaid Services, 2017 -2026 Projections of National Health Expenditures Data Release, 2018. 4

Health care premium costs can have a dramatic effect on retirement 239% S M IU M RE EP C N RA U S 68% N I H T L A HE INGS N R A E ’ S R WORKE ATION L F N I L L A R E OV 1999 2002 2004 2006 2008 2010 2012 Kaiser Family Foundation, 2018 Employer Health Benefits Survey, Release Slides October 3, 2018. 5 2014 2016 51% 2018

Seniors spend more on health care Spending All ages Spending 65 years and older Food/beverage 12. 6% 12. 5% Housing 33. 3% 34. 1% Apparel 3. 3% 2. 5% 17. 0% 15. 7% Health Care 8. 0% 13. 6% Entertainment 5. 1% 5. 4% 10. 6% 12. 0% Transportation Other U. S. Bureau of Labor Statistics, “A closer look at spending patterns of older Americans, ” Beyond the Numbers Vol. 5, No. 4, September, 2016. 6

Health care costs in retirement 1 Demonstrate how health care coverage in retirement works 2 Show the potential costs and impacts of health care coverage 3 7 Develop a strategy to help cover potential out of pocket expenses

1 Health care in retirement 8

Original Medicare Advantage plan Part A Part C Hospital insurance (Combination A, B, and often D) Part B Medical insurance If Part D is not included in Part C Part D Prescription drug coverage Medigap Medicare Supplement Insurance Centers for Medicare & Medicaid Services, “Medicare & You 2019. ” 9 1

7 2019 Medicare Part B monthly premium Hold harmless rule: Protects Social Security from Medicare premium increases § Ensures that SS benefits will not decline due to Medicare Part B premium increases § All recipients in 2019, except those who pay more than the standard Part B premium amounts, and including - Individuals turning age 65 in 2019 and starting Medicare in 2019 Individuals age 65 and over on Medicare in 2018 but were not yet receiving Social Security benefits Individuals age 65 and over who were not on Medicare in 2018 but starting Medicare in 2019 Modified adjusted gross income (MAGI) 2017 tax year 2019 held harmless (HH) 2019 Not held harmless Premium level Individual ≤$85, 000 Married, filing jointly ≤$170, 000 < $135. 50 (about 3. 5% of enrollees) $135. 50 Standard premium Individual >$85, 000 up to $107, 000 Married, filing jointly >$170, 000 up to $214, 000 $189. 60 1. 4 x standard Individual >$107, 000 up to $133, 500 Married, filing jointly >$214, 000 up to $267, 000 $270. 90 2. 0 x standard Individual >$133, 500 up to $160, 000 Married, filing jointly >$267, 000 up to $320, 000 $352. 20 2. 6 x standard Individual >$160, 000 up to $500, 000 Married, filing jointly >$320, 000 up to $750, 000 $433. 40 3. 2 x standard Individual > $500, 000 Married, filing jointly >$750, 000 $460. 50 3. 4 x standard Centers for Medicare and Medicaid Services, 2019 Medicare Parts A & B Premiums and Deductibles. 10

7 Medicare Part D monthly premiums Modified adjust gross income (MAGI) 2017 tax year Individual ≤$85, 000 Married couple ≤$170, 000 PART D 2019 monthly premium Plan premium Individual >$85, 000 up to $107, 000 Married couple >$170, 000 up to $214, 000 $12. 40 + plan premium Individual >$107, 000 up to $133, 500 Married couple >$214, 000 up to $267, 000 $31. 90 + plan premium Individual >$133, 500 up to $160, 000 Married couple >$267, 000 up to $320, 000 $51. 40 + plan premium Individual >$160, 000 up to $500, 000 Married couple >$320, 000 up to $750, 000 $70. 90 + plan premium Individual >$500, 000 Married couple >$750, 000 $77. 40 + plan premium Medicare. gov. , Monthly premium for drug plans, 2019. 11

Medigap policy § A policy purchased separately to cover what Medicare does not MEDIGAP POLICY § Covers certain expenses depending on the policy Co-payments § Premiums vary depending on insurance company and extent of coverage Coinsurance 12 Deductibles

2 Estimated costs of health care 13

Total health care projections Healthy 65 year old couple retiring in 2018 § Projected lifetime health care premium expenses $281, 847 § Total health care expenses including (dental, vision, co-pays, and deductibles) $363, 946 Healthy 55 year old couple retiring in 10 years § Total estimated lifetime health care costs would be $387, 814 (Includes Medicare Parts B and D, supplemental insurance premiums, dental premiums, and out-of-pocket expenses) Assumes life expectancy of 87 for the male, 89 for the female, and a MAGI income level below $170, 000. Health. View Services: 2018 Retirement Health Care Costs Data Report©

Average monthly Medigap premiums Average monthly premium in 2018 National average premium in 2018 for a Plan F Medigap policy is $186/month. Variations due to multiple factors, including: § § § § Different rating practices Different plan types State insurance markets Type of pricing Demographic differences Eligibility for discounts Medical underwriting (outside of open enrollment) Reuters. com, “Medicare supplement plans are changing: What you need to know, ” September 19, 2018. 15

Health care premium costs for a retiree Hypothetical example using some estimates or projections Expense Monthly premium Yearly cost Medicare Part A $ 0. 00 $ 2019 Medicare Part B $ 135. 50 $1, 626. 00 2019 Medicare Part D $ 32. 50 $ 390. 00 2018 average Medigap (Plan F policy)3 $ 186. 00 $2, 232. 00 TOTAL $354. 00 (hospital insurance) (medical insurance)1 (prescriptions)2 Held harmless avg. (average) 0. 00 Does not include: § § § Deductibles Co-pays Dental coverage Vision coverage Hearing coverage Couple $4, 248. 00 $8, 496 The cost of Medicare coverage varies based on the plan. 1 Centers for Medicare and Medicaid Services, 2019 Medicare Parts A & B Premiums and Deductibles, October 2018. for Benefits Access, Medicare Part D: Beneficiary Costs in 2019. 3 Reuters. com, “Medicare supplement plans are changing: What you need to know, ” September 19, 2018. 2 Center

Cost of living adjustments and inflation Social Security Medicare Part B Average annual cost-of-living increase last 30 years Average annual premium increase last 30 years 2. 5% 5. 1% Social Security Administration, Cost-of-living Adjustments. 17 Centers for Medicare and Medicaid Services, Part B Premiums

Annual long term care costs can be significant Medicare does not cover nursing home costs 2018 average annual nursing home cost in the U. S. $100, 375 Based on 365 days of care and private room. 3. 64% increase Percent increase represents a 5 -year annual growth rate Genworth, 2018 Cost of Care Survey. 18

Medigap policy search www. medicare. gov Medicare & You handbook

3 Developing a strategy 20

Developing a strategy 1. Be proactive. Understand how health care costs in retirement may impact you. 2. Review the potential costs of health care 65 year old couple retiring in 2018 55 year old couple retiring in 10 years $363, 946 $387, 814 3. Develop a strategy that helps mitigate the rising out-of-pocket health care expenses and inflation.

Disclosures This content is for general informational purposes only. It is not intended to provide fiduciary, tax, or legal advice and cannot be used to avoid tax penalties; nor is it intended to market, promote, or recommend any tax plan or arrangement. Allianz Life Insurance Company of North America, Allianz Life Insurance Company of New York, their affiliates, and their employees and representatives do not give legal or tax advice. Clients are encouraged to consult with their own legal, tax, and financial professionals for specific advice or product recommendations. All annuity contract and rider guarantees, or annuity payout rates, are backed by the claims-paying ability of the issuing insurance company. They are not backed by the broker/dealer from which this annuity is purchased, by the insurance agency from which this annuity is purchased, or any affiliates of those entities, and none makes any representations or guarantees regarding the claims-paying ability of Allianz Life Insurance Company of North America or Allianz Life Insurance Company of New York. Guarantees do not apply to the performance of the variable subaccounts, which will fluctuate with market conditions. • Not FDIC insured • May lose value • No bank or credit union guarantee • Not a deposit • Not insured by any federal government agency or NCUA/NCUSIF Products are issued by Allianz Life Insurance Company of North America, 5701 Golden Hills Drive, Minneapolis, MN 554161297. www. allianzlife. com. In New York, products are issued by Allianz Life Insurance Company of New York, 28 Liberty Street, 38 th Floor, New York, NY 10005 -1422. www. allianzlife. com/new-york. Variable products are distributed by their affiliate, Allianz Life Financial Services, LLC, member FINRA, 5701 Golden Hills Drive, Minneapolis, MN 55416 -1297. www. allianzlife. com. Only Allianz Life Insurance Company of New York is authorized to offer annuities and life insurance in the state of New York. 22

Thank you! Questions? 23