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Future of Retirement: Surprisingly Optimistic

Accepting that money doesn't necessarily buy happiness doesn't mean that having a smart retirement strategy is something that can be ignored.

That process is changing, though, as society lives to be older and older. Risks of needing long-term or chronic care are increased, for example.

The plan has always been simple: Save as much as you can during your working years, the "accumulation" phase of life.

"Yes, of course you need to save all you can, but for most people, unless you are wealthy, you cannot save your way to a secure retirement," Diehl says.

Instead, there needs to be a more complex strategy that focuses as much on retirement income and "decumulation" as on socking away cash.

Instead of splitting the universe into workers and retirees, new models will need to address sub-brackets of the aging process. Middle age (between the ages of 40-65) will still be the accumulation phase of wealth, but financial planners need to also think about those 65-74, now classified as "Young/Old," a group whose saving and spending habits will increasingly have more in common with their younger cohorts, Diehl says. Different financial strategies will also need to be tailored for ages 75-84, deemed "Old/Old," and 85 and up, "Oldest/Old."

Medical care is changing
He uses one of his company's own products as an example of how some might plan for that last demographic: life insurance products with a longevity rider that kick in at age 90.

As we live longer, the risk of someday needing chronic care will increase. As such, how people are cared for later in life is radically changing, with financial implications.

"In the old days chronic care was typically in nursing homes," Diehl says. "There has been a dramatic shift. If you look at government data, people are leaving nursing homes at a very rapid rate and they are being cared for at home now. In fact, data from AARP shows that if you have 10 people who are receiving chronic care or long-term care, one in 10 are in assisted-living facilities, two in 10 are in nursing homes and seven out of 10 are at home, being cared for primarily by the family."

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