Canadians unprepared for long-term care costs
Whether they're on the road to a financially secure retirement or not, people are well-versed in the concept of saving for their golden years. But three quarters of Canadians have no financial plan to pay for long-term care if they needed it, according to a new poll commissioned by the Canadian Life and Health Insurance Association (CLHIA).
The CLHIA estimates it will cost nearly $1.2 trillion to provide long-term care to the Baby Boomer generation as they pass through old age. Current government funding will only cover about half of this. That leaves a shortfall of $590 billion.
What that means for the average Canadian is that now's the time to be saving specifically for the potential costs of their own extended care.
"When you spend your entire life trying to save up for that day when you retire, the worst nightmare is having to use up all that hard-earned money to pay for something unexpected like long-term care costs," says Kelly Ho, financial security advisor and investment representative at DLD Financial Group Ltd.
The crisis in government funding of long-term care programs will likely only get worse, says financial advisor and portfolio manager Clay Gillespie, managing director at Rogers Financial Group.
"Baby Boomers are just starting to turn 65," Gillespie says. "Our health-care system is not under stress yet. How much of those costs will be downloaded to us?"
The CLHIA, while clearly biased in urging Canadians to purchase health insurance, made several recommendations in a recent policy paper on how local, provincial, and federal governments could address the funding gap, including:
establish a savings model similar to RESPs, through which Canadians could contribute a certain amount of money every year toward long-term-care costs, contributions that would be matched by the federal government
provide a tax credit to those who purchase long-term care insurance
shift government funding from institutions to individuals, who could then decide which facility or type of care if most appropriate for them
provide a tax credit to people, especially seniors, who volunteer to help other who need long-term care
But until major structural reform comes into being, financial experts say there are several steps people can take to soften the blow if they find themselves facing hefty bills for extended care.
Start talking about the realities of aging with your loved ones
"People should be having family meetings," says DLD Financial Group's Kelly Ho. "If something were to happen you want others to know what your wishes are."
Start setting aside money specifically for health-care costs.
The government won't cover everything. "It's all about cash-flow planning," Ho says. "Ask yourself, 'Am I allocating money in the best way possible? Am I covering all my bases? Should I be paying down mortgage more quickly?' There has to be a grand plan."
Get professional advice related to estate planning.
"Talk to a lawyer or someone who does estate planning, because you want to make sure your assets end up where want them to," Ho says. "Estate planning is tied into financial planning."
Learn about various insurance policies and alternatives.
Some people like the security of having an insurance plan kick in if they were to become seriously ill and needed extended care — and can afford to pay monthly premiums. Others might consider putting aside the same amount they'd pay monthly for insurance into a tax-free savings account or other savings vehicle for future, emergency use.
"People who can afford it don't really need it and people who need it can't really afford it; that first group can self-finance [the costs of long-term care]," says Rogers Financial Group's Clay Gillespie. "In a perfect world you'd want it, but you've got to prioritize."
Take care of yourself.
There are no guarantees of course, and even the most robust people out there can be stricken with the most debilitating of diseases, but there's an argument to be made for preventive care.
Things like regular exercise, a wholesome diet, and adequate rest and relaxation can all go a long way toward a healthy--and less expensive--retirement.