Aging is a topic we tend to avoid. Culturally, it's a conversation that's tip-toed around by families who don't want to think about—or plan for—when loved ones head into retirement or beyond.
But, the COVID-19 pandemic has shone a spotlight on how—and where—Canadians are aging.
A recent survey by the National Institute on Ageing and TELUS Health found nearly 100 percent of Canadians 65 years of age and older say they'll do whatever they can to age at home. But nearly a third (30 percent) of that same group say they don't feel prepared—especially in the event of a medical emergency.
Michael Nicin, executive director of the NIA, calls it an “awakening amongst Canadians” and explains the time is now to make plans and have conversations with their families about what aging at home could look like. ”There's no doubt people are starting to take it much more seriously than they ever have.”
Bonnie-Jeanne MacDonald, actuary and director of financial security at the NIA, explains that “when it comes to retirement planning, we know that Canadians want to sustain their living standards as they move into retirement, and we also know that they want to age independently in their own homes. This is why retiring Canadians need to think through the long-term implications of their financial decisions – including how these decisions will support their goals decades from now.”
Having the conversation about what aging at home could look like is a start, says Howard Kabot, vice president of financial planning at RBC Wealth Management. But, it's also important to have a plan that addresses major costs, like housing and managing health concerns while spending the golden days of retirement at home.
1. Plan for the unexpected
“A good financial plan will properly address the risks that exist,” says Kabot. Insurance may form part of the solution–from critical care and disability to property insurance. “[But another] part of it is trying to help clients understand the impact of growing older and what that could mean in terms of how they're going to conduct their lives.”
The considerations are broad. “On the positive, it's all about how they're going to enjoy their retirement years and spend their money,” says Kabot. But aging at home also calls on older Canadians to consider where home is. Maybe a vacation home somewhere warm sounds enticing. But, how important is proximity to family? And what about access to transit or necessities—the sorts of things that are hard to access should you stop driving. “If there's a medical issue, then obviously family can be a really important part of the support.”
He points to a personal experience with a family member facing extreme illness, where estimated annual expenses were around $170,000 for 24-hour care. It's a devastating prospect, says Kabot. “And there's only so much in the way of government resources.” He admits it's the worst-case scenario, but one that illuminates the importance of having a financial plan in place and family nearby.
Leanne Kaufman, president and CEO of RBC Royal Trust, agrees that planning for the unexpected is crucial to ensuring peace of mind in your later years. “While family can help with managing your healthcare needs, consider a corporate attorney for property to manage your financial needs in the case of incapacity,” says Kaufman.
2. Cost of ownership
There are also considerations surrounding your actual home.
“Conventional and longstanding financial planning wisdom advises retiring Canadians to ensure their level of secure income (from CPP, OAS, workplace DB pension plans and annuities) is high enough to cover essential expenses such as housing, food and utilities,” says MacDonald. “This would enable Canadians to sustain their living standards into later life despite the ups and downs of the financial market.”
Just one or two generations ago, many Canadians owned their own home when they entered retirement, says Nicin. But that's shifted, he explains, and fewer Canadians are retiring mortgage-free.
“On average, the median personal savings of Canadians heading into retirement is about $160,000 total,” adds Nicin. It's enough to cover the basics when you add government support programs and the Canada Pension Plan, but what about replacing a roof or leaky windows, and the unexpected costs that come with homeownership?
“If you want to age at home, then you've got to understand that the expenses may be heavy,” says Kabot. It's something your financial advisor can model within a detailed financial plan, but the point is being prepared. He says if it's going to put a strain on your living income in retirement, it's better to know that now.
3. Understand the alternatives
Nicin is quick to point out that seeing aging in the home as an either/or scenario does a disservice to the realities of getting older. “There's a spectrum of needs,” says Nicin. “In Canada, the most technical definition of long-term care is nursing homes, but if you look at international models—countries that have approached this subject much better—their definition of long-term care represents the spectrum of housing and care options.”
There are plenty of options that exist in Canada, like leisure (or lifestyle) oriented retirement communities or micro-communities and naturally occurring retirement communities. These options are worth exploring when you start getting that “empty nester” feeling or itch to downsize. Among the companionship that comes with living close to peers in one of these communities, the homeowner's association costs can sometimes include things like external maintenance, says Nicin. “So at least you don't have to worry about it.”
4. Start the conversation with loved ones
The point, says Nicin, is that aging at home doesn't have to look one way. For all the considerations, there are also options. “I think for a lot of people, the important aspect is really taking the agency to say 'I'm in control of my life,'” says Nicin. “And long-term care, nursing homes, are absolutely necessary components of this spectrum.”
It's a part of the journey of aging, he says. It's a progression. “Most people don't go straight from their home into a long-term care home,” says Nicin. “But I think the people who probably feel the best about how they plan to do this are taking necessary steps incrementally to make sure each stage of their life is managed with regard to where they live.”
“We've seen first hand the after-effects of poor planning,” adds Kaufman. “While income is a key driver to address your needs during your lifetime, ensuring the fundamental planning is in place and supported by proper power of attorney appointments and Will planning will better protect you and your loved ones.”