Rising Healthcare Costs and Your Retirement

When an individual plans for retirement, they often think of how much money is needed to fund their lifestyle. This is important, as one’s housing, travel and spending habits are personal and will affect their retirement income needs. However, many Canadians fail to anticipate the full cost of healthcare in their older years. It’s not just the added cost of a few monthly prescriptions – some Canadians will spend thousands of dollars annually on health and care-related expenses. There’s no need to panic, but there is a clear and increasing need for strategic, disciplined wealth management. Here, we take a closer look at the rising cost of healthcare as one ages and how it affects retirement.

The unexpected cost of aging

Canadians may expect to pay for additional prescription medications as they age or perhaps some assistive devices, such as hearing aids or walkers – but what if one’s medical costs far exceed what was planned for? With retirement homes costing $4000-5000 per month and long-term care costing as much as $7,000-10,000 per month in Canada, a retirement fund can be drained dramatically quickly (to be clear, these costs are per person and would be doubled for a couple in care). In the event that an individual requires full-time care but wishes to stay at home, 24 hour in-home caregiver services (such as a PSW) can cost as much as $30,000 per month1. This is not attainable for all Canadians, and can affect the retirement, estate and intergenerational wealth transfer plans of even the most affluent families.

The sandwich generation and your retirement

Oftentimes, the rising cost of healthcare as one ages will affect an individual before they reach an advanced age themselves. Many Canadians support their aging relatives, spending both time and money caring for them in their senior years. The average Canadian spends six years of his or her life caring for a dependent parent or senior relative who has become ill. Approximately 30% of Canadians with dependent (or semi-dependent) parents over age 65 will take time off work to care for them. From a financial standpoint, many in the sandwich generation (those with dependent children and parents at the same time) will take on some financial responsibility for their parents care. A recent Globe and Mail article told the story of one middle-aged professional who, along with her sister, has spent over $500,000 to care for two aging parents living in separate care facilities2. These costs were accumulated over a few short years and paid from the siblings’ own savings (presumably impacting their own retirement plans). While this number may seem shocking, they are far from alone – the number of seniors in Canada is growing, with an estimated 2.4 Canadians over 65 projected to require paid or unpaid care by 20263. If these seniors don’t have the funds to pay for their care needs, the financial burden will likely pass to the next generation.

Plan well to live well at every age

Wealthy Canadians are not immune to financial issues in their older years – particularly if costly medical expenses became a reality – but this can be prevented with careful planning and expert structure of one’s assets and tax liabilities. Our team can help Canadians plan for the rising cost of healthcare as well as the potential cost of caring for one’s parents. To learn more, please reach out to Nader Hamid or the Total Wealth Management team. We’d be pleased to offer a consultation on this subject and help navigate the complex financial elements of aging and retirement.


1 www.theglobeandmail.com/business/article-health-care-costs-threaten-even-the-most-robust-retirement-portfolios/
2 https://www.theglobeandmail.com/business/article-health-care-costs-threaten-even-the-most-robust-retirement-portfolios/
3 https://www.cbc.ca/news/business/seniors-canadian-census-aging-home-care-1.4097293

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