Protect Your Retirement From The Cost Of Long Term Care In Canada

February 15th, 2011 | Author: Mitch Reynolds

Protect Your Retirement From The Cost Of Long Term Care

RRSP Protection with Long Term Care Insurance

Long term care cost If you are a member of the Canadian baby boomer pack, you might be somewhat concerned about your retirement. Building up enough money in your RRSPs, employee pensions and the new TFSA account are great tools to becoming financially secure once you stop working. But have you considered the risks to your retirement plan?

By risk I am not speaking of the obvious retirement savings plan risks. The obvious risks are not saving enough money and having a nest egg that could run out. Another risk would be inflation eating away at your money, making it harder to fund a retirement in a world that is getting more expensive. The other BIG risk, and the one that is most commonly overlooked is the risk of health. With one in two Canadians needing long term care support as they age, the cost of providing that care will rest on the shoulder of us, the average Canadian and their immediate families to foot the bill.

Do you expect the government of Alberta to provide the care you need as you age? With limited resources available in the health care system, and a huge wave of retirees about to be unloaded on the system, there isn’t enough money to provide everyone with the care they need and deserve. The reality is that if you want to age with the kind of care and support you would naturally expect, the cost for that level of care is going to have to come out of your pocket, not the government’s.

So, what is the cost of care in Alberta? It depends on what you want. Home care in the most expensive form of care. Having a registered nurse come to your home would cost you in the range of $35 – $40 per hour. Your wouldn’t need a nurse for more basic activities, like cooking, cleaning and providing you with transportation. This could be done by a regular home care worker. The cost for that service is from $18 – $28 per hour. Or maybe you decide to hire a live in care provider. You will be required to pay at least minimum wage of $8.80 per hour and room and board. Doing the simple math on these costs, you would need between $3,250 and $5,000 per month average above your regular monthly expenses.

You can also look into facility care. The problem here is that it is not so easy to get a bed in a long term care facility. If your only resort is to get a bed in an Alberta Health Services long term care facility, the wait list is over a year long. Then you will be placed in any available bed anywhere in the province. This regularly cause families to break apart as elderly couples are split up and parents moved far away from their children and grandchildren. You could choose a private facility. There are more beds in the private sector than in the public funded system, but still the resources are limited. In the private sector the laws of supply and demand will rule. If you need long term care you will need to compete for those beds with your dollars. There will be many aging baby boomers all looking for the same limited care facilities, it is natural to expect the cost of these beds to rise in the future. At present you can expect to pay about $3,500 to $4,000 per month for a long term care bed in a private or semi-private facility.

The question now is, how long will your retirement savings last if you add these extra costs to your ongoing income plan. Adding $3,000 to $5,000 EXTRA in monthly costs to retirees on a fixed income could mean the retirement plan collapses in 4 – 7 years. This is an additional $45,000 to $75,000 per year (assuming a 25% tax rate). Could your plan support those costs? And that is for only one person! What if both members of an elderly couple each need care? The costs can more than double, as some of the ongoing support the one spouse would provide is gone, and even more care has to be paid for. Or what if one person moves into a care facility and the other spouse stays at home with all the ongoing maintenance costs of running a home? That too is very expensive.

So, without a plan for your long term care, your overall retirement plan is in jeopardy. You can solve this care need with a simple and effective insurance product called Long Term Care Insurance. It provides you with weekly or monthly income to offset the high costs of this care. Benefits from a LTC policy are tax free to you and will not limit any of your pension, RRSP, or government benefits. You could buy up to $2,000 per week in tax free income each (this is rather expensive and most people are planning for between $500 and $1,000 per week).

Find out more about long term care insurance

At Life Guard Insurance we can show you how to design a long term care plan to protect your retirement plan and provide you with the care options, lifestyle choices and dignity your deserve as you move into the retirement years.

The article was written by Mitch Reynolds+. If you found this article interesting or it made you think, please feel free to share your comments below. Liking us on Facebook, giving us a +1 on Google or Tweeting this article about long term care insurance would also be very much appreciated.