Living in your later years can be expensive – plan ahead

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The ultimate trade-off of financial planning is whether to spend now or save for a rainy day.
The ultimate trade-off of financial planning is whether to spend now or save for a rainy day.

Living longer changes the dynamics of financial planning. Old age can be very expensive.

Everyone is different and there is no way to predict the future. That is the challenge of planning for later years.

Challenging to predict your future lifestyle includes where you will live. And challenging to estimate the cost of growing old.

The ultimate trade-off of financial planning is whether to spend now or save for a rainy day. How do you really know what is best because the future is unknown?

A useful exercise is to look forward and understand the types of medical issues that could arise. It will most likely be medical issues associated with aging that will be the reason life gets expensive during the last decade of your life.

Scott McNabb, Executive Director of HomeWatch CareGivers, spoke to the Estate Planning Council of Halton in March. He provided an interesting perspective on the aging process.

We understand people are living longer and many live into their nineties. More than 25 per cent of seniors living at home receive help with day-to-day living activities. Ten per cent of seniors over the age of 80 live in a long-term care facility.        

According to the Canadian Institute for Health Information, the leading cause of injury to seniors is as a result of a fall. Eight-five per cent of injury hospital admission is a result of a fall. Half of those who survive lose their mobility and 40 per cent lose their independence.

Falling is a risk that could significantly change your life and significantly add to the cost of living.

As Canadians live longer, dementia can become a medical issue. According to the PCCC Mental Health Survey, 2002, dementia issues are low at age 65 but increase steadily until by age 90 they affect 50 per cent.

In Halton the Alzheimer Society of Canada estimates there are currently 5,600 people suffering from dementia and that number will grow to more than 11,000 by the year 2031.

In previous generations things were different. First of all people did not live that long. When they did family members were available to assist when needed.

Today things are different. Children often live far from their parents and both husband and wife are working without excess time to be devoted to care for an elder family member. In addition, many families are now blended, which adds additional dynamics to family caregiving challenges.

More seniors will have to have to be cared for by others.

Initially care can be received from the healthier spouse.

The physical and emotional stress on the healthy spouse can take a toll on their health.

Many seniors are single so there is no in-house help available. The end result is aging seniors will be increasingly dependent on others. Now the issue becomes who pays for these new expenses.

Some services are available from the government. Many people would likely want to receive additional care and that will be your own personal expense.

The financial strategy needed is how to build enough financial resources that if you have increased medical and living expenses in your later years, you will be able to afford it.

We have a few suggestions. We recommend that you project your retirement cash flow needs at least annually. Add in some estimates of additional costs to see if your family finances can handle these extra expenses.

Consider using your Tax- Free Savings Account as a way to save for extra costs. Money held in this account grows tax-free and can be withdrawn at any time.

Another source of funds is from the sale of your house. For example, if you moved into a retirement home, the proceeds of the sale of the house could be used to pay the monthly living costs.

Aging is expensive. We encourage you to plan accordingly.