With many Canadians now living longer, planning for our longevity has never been more important. When we create financial plans for our clients, one important component is factoring in the potential costs of future care. Have you given serious thought to your plan for a time when you may need long-term care (LTC)? It is also important for clients to revisit their plan and any assumptions they have made for future care as time goes on. The Covid-19 pandemic reminds us why this may be important as it has caused some to re-evaluate their vision for care. The associated costs may also need to be adjusted. With an estimated tripling of Canadians over the age of 85 by 2050*, it is expected that LTC services will continue to rise in cost. If you don’t yet have a plan, here are some ideas on where to start:
Determine the type of care you may need or want.
Care means different things to different people. Preferences for quality of life are very personal, as are the types of custodial support one may feel comfortable with. Some may wish to remain in their own setting for as long as possible. Others may seek a community setting for companionship. However, regardless of the setting, we should plan fora time when we may not be able to care for ourselves.
Consider the logistics of that care.
Most in-home LTC is done by unpaid family caregivers. If you have children, are they going to participate in your care? Is this logistically possible? Have you asked for their perspectives? Providing care can have significant mental, financial and physical impacts on family. If you decide to seek care outside of your home, consider that this may not always be immediately available. Prior to the pandemic, wait lists for various publicly-fundedLTC facilities, and some private facilities, were months or years long.
How will you pay for it?
Once you determine your preferences, you will need to plan for the potential costs. LTC costs are not insignificant by any means and may be surprising to many. The accompanying chart shows the average rental cost (not including care), which can be in upwards of $47,000 per year depending on province. In-home care can be even more costly, with specialized care running around $40 to $90 per hour**, or $110,000 to $260,000 per year.*** One question we often hear: "Will the government help?" Government support is often limited to low income individuals. Yet, even if accommodation is subsidized, keep in mind that in this situation you may not have much choice on the type of care received. Oftentimes, reviewing a financial plan reveals that many investors have enough assets to cover a period in which LTC may be needed. Beyond self-funding, there may also be planning tools to support the cost. Insurance may be one solution. The number of pure long-term care insurance policies has declined over recent years, partly due to high claims rates. This has also led to increasing premiums. However, hybrid products, typically a life insurance policy with a long-term care insurance rider bolted on, or an annuity with a long-term care product, may be cost-effective alternatives to pure LTC policies.
Write it Down
Like a financial plan, committing your objectives to paper can be a worthwhile exercise. You can discuss your plan with those you are close to, making sure it is practical in the context of resources, abilities and responsibilities to others. The end goal should be to establish a road map to guide your thinking and ensure your wishes for future care are known. As advisors, we can work with you to ensure your broader wealth plan considers your vision for your future care.
*The Future Co$t of Long-Term Care in Canada, National Institute on Ageing, Oct. 2019
***Based on 8 hours per day, 7 days per week for 52 weeks.
The views expressed are those of Wes Ashton, Director of Growth Strategy and Portfolio Manager, and not necessarily those of Harbourfront Wealth Management Inc., a member of the Canadian Investor Protection Fund.