Pre-retirement health and care planning
If you’re close to retirement, you’ll have several financial issues to consider. But you’ll want to pay close attention to two areas in particular: health-care and long-term care costs.
How can you prepare yourself for these expenses? The best way to begin is to get an early start on estimating how much these care costs will cost you.
PLAN FOR THE UNEXPECTED
According to the Four Pillars of the New Retirement study from Edward Jones and Age Wave, retirees’ greatest financial worry is not economic uncertainties like recessions, inflation or taxes, even during the extreme uncertainty caused by the COVID-19 pandemic.
The study found that their greatest financial worries, rather, are encountering unexpected expenses and the cost of health care, including longterm care.
Among those aged 75 and older, health-care and longterm care costs (47 per cent) outrank unexpected expenses (43 per cent) as the biggest financial worry. And women retirees are noticeably more worried than men about health-care costs (54 per cent versus 40 per cent).
The annual out-of-pocket costs for traditional medical expenses may not be insignificant, but it's certainly a number that can be addressed by careful planning. National averages for public long-term care homes — from basic to private rooms — range from around $22,700 to $34,200 per year.
STARTING EARLY
The preference for most people is to be able to continue living in their own home as long as possible. It is important to know that the cost for private home care can be significantly higher than the cost of moving into a long-term care facility.
Between regular medical costs covered by your provincial medical plan and those not covered by it, as well as costs resulting from the possible need for long-term care, your health-care and long-term care bills can add up fast. To meet these costs, you need to plan ahead and take action.
It is essential that you incorporate health-care expenses into your overall financial strategy. You can also work with a financial advisor to run some “what-if” analyses to see if your strategy would be derailed by a potential long-term care stay. Your financial advisor may also be able to suggest specific protection vehicles that can help you meet the costs of long-term care. The best time to prepare for your health-care and long-term care costs during retirement is well before you retire. So, if you haven’t already started, now is the time to do so. When it comes to paying for health care, the fewer surprises, the better.