A three-part series on the implications of aging for retirement planning.
Life expectancy in Canada is going through the roof. According to the Society of Actuaries, we live in an era where many couples expect to retire around 60 and there’s an 18% chance of at least one member of that couple living to 95 or beyond.
Living to 100 is no longer a bizarre speculation but, for increasing numbers of Canadians, a scientific inevitability. According to Sarah Knapton, Science Editor of the reputable British newspaper The Telegraph (May 1, 2015):
“Staying slim, keeping away from cigarettes and owning a home by the age of 50 could be the secret to living to 100 years old, scientists have found. In a landmark 50-year study investigating the link between lifestyle and life span, researchers in Sweden have discovered some intriguing similarities in the habits of centenarians.
All men involved in the study were born before the outbreak of the First Word War in 1913, and their progress has been followed since 1963. Just 10 of the original 855 strong cohort survived until their hundredth birthday.”
Specifically, Ms Knapton added: “All were non-smokers, had kept themselves slim and fit and had good posture and low cholesterol and low blood pressure. They all had still been in active work until at least the age of 54; had drank no more than four cups of coffee a day and had owned their own home by the age of 50.”
A retirement spanning 35 years or more
As reported by Cynthia Caskey writing in the Financial Post (June 12, 2012), according to the recent census Canada could have more than 17,000 centenarians by 2031. In other words, a significant number of Canadians are looking at a retirement spanning 35 years or more.
Here’s another thing to consider: The National Advisory Council on Aging says 80% of Canadians 65 and over have a chronic health condition. In short, we’re going to live longer, and whether we want to admit it to our healthy selves now, our health will likely decline and we may need to face the fact of long-term care.
Millions of Canadians in their prime working years are focused on wealth accumulation and tax optimization, but when planning your finances for your future you really need to consider wealth preservation.
A no-nonsense, unsentimental analysis
Ms Caskey performed a brief, no-nonsense, unsentimental analysis of some of the key aging related factors you may wish to consider in anticipation of an extended retirement:
- Have a heart-to-heart talk with your partner and/or children about what arrangements would be made if you decided to ‘age in place’ in your own home, or if you will move into a long-term care facility.
- If you have a family history of disease such as Alzheimer’s or stroke, ensure that’s factored into the discussion, as well as what to do in the event of mental illness or decline.
- Women, like it or not, should pay particular attention, because illness, whether your own or your spouse’s is likely to hit harder. Women live longer than men and are usually responsible for caring for their spouse in old age.
- In addition to your overall savings, consider solutions that can supplement your income in case of illness, such as critical illness or long-term care insurance. While critical illness insurance may be included in your employment package, long-term care insurance isn’t well known and often something you would need to invest in on your own. It’s not a lump-sum payment but an income stream to cover ongoing costs of nursing or personal care.
- If you haven’t already done so, appoint a power of attorney for personal care so that someone close to you can make decisions on your behalf if you no longer can. You should also consider appointing a power of attorney for property to allow someone to manage your financial affairs in your best interest.
The recent census statistics on aging highlight a fundamental financial reality: The main risk we’ll face in retirement is longevity. The longer we live, the more money we need to survive, and that’s only further complicated by health risks. Retirement planning has never been more important than now, and tapping into all available resources: investments, family support and insurance can help you better manage the risk.
At The Wooding Group, effective planning for your retirement is important to us. It is a subject we will be dealing with in the next blog in this series – particularly from a financial perspective. We encourage you to watch out for it and please don’t hesitate to contact us if you have questions, or would like to setup a meeting in the near future.
The Wooding Group at CIBC Wood Gundy, 780 498-5047