Many Canadians are reasonably well set for retirement, financially speaking, thanks to personal investments and social security provided by the Canada Pension Plan (CPP) and Old Age Security (OAS). However, many Canadians avoid thinking about some worst-case scenarios – that they may end up requiring long-term care or may suffer from Alzheimer’s Disease or otherwise require extended care. No one likes to think this will happen to them or their parents but these kinds of things happen everyday.
Two case studies of families caught up in the need for senior care show how worst case scenarios can play out. In those stories, told here, one turns out better than the other.
The need for long term care insurance
Jim Ames and his daughter Margaret thought he was set for retirement. Had he looked at it several years before his early retirement, Jim might have realized that he was set to receive income of about $30,000 per year. With no mortgage to pay and no dependents he might have been able to live reasonably comfortably on this income, pulled together from a work pension, along with CPP and OAS.
However, sadly, he had not really accounted for the eventuality that he might some day require assisted living services in one of Ontario’s retirement homes. Coupled with the fact that he had to quit work at the age of 58 and begin drawing his pension early, Jim and Margaret faced an annual shortfall of over $12,000.
There are a number of ways that they could have been “luckier,” of course. One way is that Jim might have purchased long term care insurance. The insurance premiums over 30 years of working would have cost Jim less than one year’s shortfall that his family currently faces. Across Canada, there are more cautionary tales like that of the Ames’.
None of us likes to think that the worst can happen but it is always best to plan for the worst, even as we hope for the best.
On the other hand, not all stories end in financial strife.
Benefits of financial planning
Helene is a Hull, Quebec senior who, regrettably, has been stricken with Alzheimer’s disease. Helene’s son and daughter-in-law took on care giving for a while but they eventually admitted that Helene required more care than they could give. When they opted to put her in a retirement home with Alzheimer’s support, they needed one they could afford, also, of course.
They found a home near their city that offered Alzheimer’s care, at a cost of $6000 per month for full service. Had they been short of available funds, this would have only compounded the difficult times they were facing. Helene had a pension from her career as a federal employee, along with CPP and OAS but this was still not quite enough. However, Helene had accumulated $80,000 in a Registered Retirement Savings Plan (RRSP); by converting this into a Registered Retirement Income Fund (RRIF) her children could cover the monthly shortfall they would have faced.
While she continues to degenerate, their sadness for Helene isn’t compounded by financial stress. As long as her RRIF capital earns at least five percent per year, her income will last long enough to cover her through five years, more time than doctors have given her. While the story of her failing health is indeed sad, the family has more than enough to cover care costs as Helene nears the end of her life.
While we all hope for the best in retirement it is a simple fact that a percentage of us will be unpleasantly surprised at our state of affairs in retirement. Buying long-term care insurance and using sound financial advice on savings and funds are two ways that we can ensure our security in retirement.
On the other hand, the worst thing that can happen to you if you over-prepare is that you might end up with too much money or too much security. In some cases, people are pleasantly surprised to find that they can afford to retire now more luxuriously than they might have thought possible.
Bio: Jim Huinink is Director of Web Strategy for a premier authority on retirement homes, comfortlife.ca, which covers homes from across Canada, including Ontario retirement homes and Toronto retirement homes.
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I think it’s hard to predict how long you will live, but it is a good idea to make sure you have enough of a cushion.
Long Term care is expensive, especially if you go the private route. Some of these can cost up to $3500-$4500 a month!
A lot of the time, children end up chipping in for their parents, and this really exagerrates the “sandwich generation”. They have to take care of the expenses of parents AND kids simultaneously.
It is really important to plan ahead for retirement while you are young. In that way, you can arrange everything you might need in the future. There is assurance.
It does seem like Canada has a much better safety net for retirees. Namely, free health care!
I think everybody should plan in advance for retirement when they are young.Canada is a great place for retirees.
I think everybody should plan in advance for retirement when they are young.Canada is a great place for retirees
Thank you for post.
That the lollies and crisps is out of a newspaper article he read.(afaik) Along with that the song is definitely about changing yourself once you love another individual just to…
Thanks for sharing. On a side note, my parents are old and I am looking for a Best Retirement Communities for them. One of my friends suggested me Garden Spot Village .He said that it is the best place for retirees as they can get healthcare services .Can anyone give feedback about them? I will appreciate.