Health concerns trump finances for Canadian Boomers

We’re living longer than ever, and the prospect of decades spent in old age is keeping Canadian Baby Boomers up at night; as those approaching retirement rank health concerns over finances.

According to the 2013 RBC Retirement Myths & Realities Poll, 70 per cent of Canadians aged 50 to 59 rank changes to their physical health as the top challenge they expect to face as retirees. Finances ranked a distant second, with 57 per cent of those Boomers expecting changes to income to be a concern during retirement.

And it seems men are losing more sleep compared to women when faced with aging. Seventy-three per cent of men said they’re particularly concerned about changes to their health, compared to 66 per cent of women.

And Boomers have every right to worry. If you're a Canadian who turned 65 in 2012, you can expect at least 20 years of retirement, according to Statistics Canada. But those years don't come cheap as one's health fades and the prospect of long-term care creeps on to the horizon.

The Canadian Life and Health Insurance Association (CLHIA) estimates Baby Boomers will require at least $1.2 trillion in long-term care programs; half of which will be covered by government coffers.

So who pays for the difference? It comes out of your pocket, yet Canadians continue to be ill-prepared for the mouthing costs of aging in retirement.

A recent poll by CLHIA shows 67 per cent of Canadians aged 60-plus don't have a financial plan to cover the costs of on-going long-term care. And even though women traditionally outlive their male counterparts, 70 per cent of Canadian women don't have a plan in place to cover their long-term care needs, the poll shows.

So how can Canadians finance medical and care on costs on a fixed income?

It all starts with taking stock well in advance, according to Ottawa-based RBC regional financial planning consultant Bernie Clermont.

“When you talk about things like healthcare, dental care, eye care and prescriptions, there’s a need for care not just at the end but toward the end,” Clermont says. “About 50 per cent of our clients say healthcare in retirement is an issue they’re worried about. Clients are thinking about this a lot earlier than they used to.”

Start by doing a little research

“Anybody who’s worried or thinking about funding healthcare costs in retirement should look at what they have now and what they’ll have in retirement and look at the gaps,” Clermont says. “A lot of people don’t know the difference between pre-retirement and post-retirement benefit plans. They may have a plan that pays 80 per cent, 60 per cent, 50 per cent, or what have you, of expenses for things such as dental and eye care to a maximum.

“Most plans are limited to a specific dollar amount,” he adds. “If you have a major health issue, that can go very quickly.”

Determine what the government will and will not cover

“A lot of people think that as soon as they turn 65, the government pays for all your drugs, but that’s not necessarily the case,” Clermont says. “Not all are covered. If you need a specific prescription [that’s not covered], you may have to go to a benefits plan.”

Look into various types of insurance. “Things like life insurance and critical-illness insurance are not necessarily cheap, but it’s important to look at this not when you’re 60 but when you’re 40 or 45 or younger,” Clermont says. “When you’re older, some products become much more expensive or you may not even qualify.”

Do the math
Consider that the typical cost of a private retirement home is about $4,500 a month and that you may live in one for 10 years. Or determine approximately how much you’ll need to spend on things like eye and dental care as well as prescription medications per year in retirement.

“Build those expenses into a financial plan now,” Clermont says. “Run the figures backward. Maybe you’ll need to save $400 a month or $100 a month for 20 years.”