Last week I had the pleasure of hosting a webinar with the great team at Realcare. Their company provides in home and institutional healthcare services in Winnipeg providing nurses aides and companions for their clients. I have had many conversations with the company’s founder, Elba Haid, over the last year and something we share a great passion for is providing opportunities for people to live and choose the life they want to live. Something we also share is our concern over the fact that very few people are planning for the options that are available to them and only focussing on meeting their retirement lifestyle goals. Ultimately, without planning for it, most people will not be left with choice and will be forced to take the options that they can afford, not necessarily the options they would choose if given the opportunity.
Over the last few decades, most plans for senior care for our family members involved moving our parents or grandparents into an assisted living home. This is often a stressful move on both the senior who is moving and their family members who often have a great deal of guilt over the move. More recently, these plans have come into question due to the risks which have been created from the Covid-19 virus. For full disclosure, I am not saying assisted living homes are bad plan for some people because I have many clients who are living in these homes and are very happy with their lives there. The point I am making is that most people have used assisted living facilities as a default solution because they were unaware that they have options available to them. For example, if given the choice, would you or your family members prefer to stay in your home and receive the help you need there? Would it be worth it to you to avoid the stress and guilt associated with moving a family member if someone could see them in their own home? Would this contribute to you and your family members living longer and happier lives? I think that there is a great deal of evidence to show that it would likely be the case and given the choice, many people would prefer this option. The question becomes, how do you pay for it?
There is no doubt that in-home care has a cost to it, but it may not be as much as you think. Really, the cost depends on each individual as everyone’s needs are different, even more reason why personalized plans should be made for health care. In terms of hourly costs, I have seen them range from approximately $25-$30 per hour for services and there is usually a weekly minimum of about 3 hours for in home care services. These services can range from things like helping with laundry, cooking to help with medications and many more. Your total costs will ultimately depend on your needs and so if you only need 3 hours of help per week then your costs may only be $90 per week. If you require 3 hours of service per day, then you will be looking at costs closer to $33,000 per year. Of course, if you need full time service then costs would be higher than that but the main consideration to remember is that the plan would be customized to you so you can choose if you are willing to pay for it or if other options would be preferable.
Even though the in-home care costs may not be as much as you expected, $33,000 per year or more is still no small amount of money for most people. So how do pay for it? You could of course use your retirement resources if you can still live the lifestyle you want to live and pay for your care needs. But even if you have the resources there may be a better option which is more tax preferred and costs you less. Long term care insurance has been overlooked for years yet it may become one of the most valuable assets people have later in life. This solution works pretty much as the name suggests, it will provide monthly benefits indefinitely which can be used for health care solutions including in home care if the covered person qualifies. To qualify for the coverage each insurance company will likely have their own definition but typically you will qualify if you are unbale to perform a minimum of two activities of regular daily living. This could include bathing, dressing, toileting, feeding etc. Looking at an example:
If there is a couple, male and female, both aged 50 and are looking to have $1,000 per month each in long term care coverage for their future the approximate cost now would be $56.15/month for the man and $78.01/month for the woman (based on standard health ratings with Sunlife insurance as of June 2, 2020).
As Elba so rightly pointed out to me last week, $1,000 per month will not go very far when it comes to coverage, and she is absolutely right but it’s a nice round number that you can multiply out so if you want $3,000 per month of coverage you could essentially triple the monthly cost and it will give you an approximate estimate of what your monthly costs for insurance will be. When you are receiving the benefit, the money will be paid to you tax free and so this can be a very effective and tax efficient way of paying for health care services while also preserving your investment capital. Consider the fact that if you pay for the coverage for 20 years before you are able to claim on it, you will have paid $13,476 for the male in our example and $18,722.40 for the female. If you were to live another 20 years afterwards to age 90, both individuals would have claimed $240,000 from the insurance tax free. Understandably, not everyone wants to pay for just long term care insurance on it’s own because there is no guarantee that you will need it but there are many insurance companies who offer Critical Illness insurance which can convert into long term care coverage later in life which is a great option for many people.
Retirement lifestyle planning has been the focus of the financial services industry for the last number of decades. It is time that we also start planning beyond that as people are living much longer and are being forced to stretch their assets even further. All things being equal, I think that everyone would choose the opportunity of choice over how and where they live later in their lives.
-Grant White, CIM®, CFP®
Grant White is a Portfolio Manager/Investment Advisor at Endeavour Wealth Management with Industrial Alliance Securities Inc, an award-winning office as recognized by the Carson Group. Together with his partners he provides comprehensive wealth management planning for business owners, professionals and individual families.
This information has been prepared by Grant White who is a Portfolio Manager for Industrial Alliance Securities Inc. (iA Securities) and does not necessarily reflect the opinion of iA Securities. The information contained in this newsletter comes from sources we believe reliable, but we cannot guarantee its accuracy or reliability. The opinions expressed are based on an analysis and interpretation dating from the date of publication and are subject to change without notice. Furthermore, they do not constitute an offer or solicitation to buy or sell any of the securities mentioned. The information contained herein may not apply to all types of investors. The Portfolio Manager can open accounts only in the provinces in which they are registered.