Life after retirement: Health care costs require careful planning

Life after retirement: Health care costs require careful planning

 Audrey Miller, Special to Financial Post | May 13, 2015 11:44 AM ET


Health is the one factor that advisers do not often take into account when aiding families with financial planning.

The press has been writing about the greying of our population and how many of us are now living well into our 90s. Close to one in four persons in Canada will be aged 65 and over by 2030, compared to just 15.3 per cent in 2013, according to Statistics Canada. However, when planning for retirement and your future, do you know what it will cost to look after yourself or a loved one?

Health is the one factor that advisers do not often take into account when aiding families with financial planning.

And yet, according to a BMO Wealth Institute report, Canadians expect to spend an average of $5,391 in out-of-pocket medical expenses every year after the age of 65. Not only is this an uncomfortable reality, but this figure doesn’t begin to address what Canadians may be facing.

A recent Sun Life Financial survey revealed that 41 per cent of Canadians who retired early cited personal health as the reason.

I have met with many adult children whose parents are living longer than they had anticipated and they are referred to me to explore a move to another care facility or other ways to reduce costs.  Not an easy situation.

Has your financial adviser been able to advise you how much money is needed to look after your parents, or your partner, especially critical in the last 10 years of life when disability is anticipated?

Besides the emotional cost of providing care to parents, and the time spent away from work, friends or other family, seven in 10 caregivers are contributing or paying for their parent’s care, according to a BMO study. And one-third (34 per cent) of those providing care made a provision for this parent in their estate plan.

For the employed caregiver (35 per cent of employed Canadians report providing unpaid care to a family member or friend), there is also the cost of time spent away from work, missed opportunity and career advancement.

What does caregiving look like? Transportation is the number one caregiving task. But all of the other instrumental activities (shopping, banking) of daily living and the basic activities of daily living (bathing, feeding, toileting) are where the real costs start to add up, because the caregiver usually ends up paying for qualified caregivers to provide these non-medical services.

Many of us need to supplement what the government can provide or what we can provide ourselves. For those who choose to hire a paid caregiver, the typical home health care agency 2015 rates for hiring a personal support worker are not insignificant.

Hourly Toronto rates give a good indication of what you might be facing. Rates would be comparable elsewhere in Ontario, B.C. and Alberta, but can vary in other provinces.

These figures are only for the costs of hiring a caregiver.  There are many other out-of-pocket expenses such as groceries, transportation, supplies, assistive devices, accessibility adaptations, to name a few. And then consider that, along with age, we see an increase in disability. Further, one in three over age 85 will develop dementia. We know that dementia is a progressive disease that requires 24-hour care.

Most adults providing care to their parents are middle-aged or heading into the early retirement years themselves: 24 per cent are between the ages of 45 to 54 years; and 20 per cent are 55 to 64. Retirement or a second career, even with some accumulated wealth, does not look so golden.

As family members and professionals, we need to be better prepared. The cost of care is only going to become more expensive, especially as our public and private resources are reduced.  Not only will we soon have more seniors than young people under 15, but our pool of those who are willing to be paid to do this work will also become smaller.

Understanding both your own and your loved one’s medical history and care needs as well as available financial/emotional resources is an important step in the planning process. Geriatric care managers and financial advisers together can ensure your hard-earned money will be used for your care needs. This information and good planning should take you as far as possible. Read here: Life After Retirement

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