Planning for life beyond 100

November 09, 2022 | Leanne Kaufman


Maintaining financial security up to age 100 requires long-term planning for health care and living costs.

“We are now at the stage where we have the largest population of Canadians in history just at the brink of retirement and my advice to them is to take that long term perspective in their planning”
- Bonnie-Jeanne MacDonald, director of Financial Security Research at the National Institute on Ageing (NIA)


Intro speaker:

Hello, and welcome to Matters Beyond Wealth with your host, Leanne Kaufman, President and CEO of RBC Royal Trust. For most of us, talking about subjects like aging, late life and estate planning, isn't easy. That's why we're going to help get the conversation started on this podcast, while benefiting from the insights and expertise of some of the country's top experts. We want to bring you information today that will help to protect you and your family in the future. Now here's your host, Leanne.

Leanne Kaufman:

Hello, I'm Leanne Kaufman. Welcome to RBC Wealth Management Canada's Matters Beyond Wealth. I'm delighted to introduce our guest today, Bonnie-Jeanne Macdonald, Director of Financial Security Research at the National Institute on Ageing. Bonnie-Jeanne is a well-known and respected actuary whose research focuses on the financial and health aspects of Canada's aging population. Her work aims to improve retirement financial security for Canadians through practical insights, industry innovations and government solutions.

Bonnie-Jeanne has published numerous academic papers on a wide variety of topics relating to retirement financial security for Canadians. Her award-winning research contributions have been adopted by industry and government in Canada and around the world. She is a prolific keynote speaker at industry and public policy engagements and a regular contributor to The Globe and Mail.

Bonnie-Jeanne, thanks for joining us today to talk about the financial security to live to 100 and beyond, and why this matters beyond wealth.

Bonnie-Jeanne MacDonald:

Thank you, Leanne. It's a pleasure to be here.

Leanne Kaufman:

So planning for retirement from a financial perspective has traditionally often been focused on how we want to live out our senior years and the needs that we can foresee sort of in the near term. But demographic trends are really changing this conversation. We know more Canadians than ever are living to 100 and beyond, so may have 30 years or more in retirement. In fact, depending on the age at which we retire, some of us may actually live in retirement longer than we worked. But in your opinion has our planning kept up with these realities, Bonnie-Jeanne? And what are some of the implications that Canadians may not be thinking about when it comes to this increased life expectancy and the impact it has on their personal financial planning?

Bonnie-Jeanne MacDonald:

Without a doubt, Leanne, retirement financial planning, it's a very complex challenge. That's because we're being asked to do something that we've never been asked to do before, and that is to make decisions now, that are going to have direct impacts on our more vulnerable selves, 10, 20, 30, or even 40 years into the future. And the human brain is just not naturally equipped to think that way. And this is especially true when it comes to bad things that can happen to us in the future. And when we do start to take this longer term perspective, we can see a current trend that the reality is that, retirees today are really facing a kind of perfect storm as they move into retirement. And that's because we have a trend away from workplace pension plans. We have historically low interest rates and that's going to bring down retirement income for many.

And while income is going down, however, the price tag of retirement is going up. And that's because along with being the largest generation in history and having the longest life expectancies, baby boomers were also the first generation to have relatively few children. And adult children have traditionally been, and they continue to be, the backbone of long-term care in Canada. And in fact, research at the National Institute on Ageing, we found that 75 percent of all care is being provided formally by those close family members.

So what Canadians don't quite realize is that senior care, it's not part of the Canada Health Act. It's not a guaranteed service like doctors and hospitals. So really it's been the family that's provided this care for Canada's elderly. And without the support of those adult children, retiring Canadians really do now need to prepare to finance longer time periods with less money and higher expenses. So if we layer on top of this a very severely problematic and underfunded public home-care system, and aging population is going to squeeze that even further, if we put this all together, we really do see that baby boomers are facing a kind of perfect storm as they move into retirement.

Leanne Kaufman:

Well, and you bring up a good point. And I know we want to focus a little bit on the public and the social services side of this. I mentioned the fact that many Canadians will spend more years in retirement than they do working. But that public social service and those pension plans, you mentioned that even do exist, they weren't necessarily designed with that in mind with such a long trajectory of retirement. So what are your observations on the readiness of our public systems to manage this massive demographic shift?

Bonnie-Jeanne MacDonald:

The irony in this is that population aging was blamed for the gaps that led to the pandemic crisis in the nursing homes across Canada. But the interesting part is that when it comes to long term care demand, we're really just at the tip of the iceberg in terms of population aging. In 2021, the oldest baby boomer had only turned age 76. And 76 is the age of at the vast majority of Canadians are still living independently and they don't actually require care. So we at the NIA, we actually did do very complex projection of the Canadian population using a micro simulation model. And we found that if Canada does continue on its current track, the cost of publicly funded long-term care for seniors, and this would be nursing homes and home care, it would more than triple in 30 years rising from about 22 billion to 71 billion. And that's all in today's dollar.

And that's only really one part of the problem. Another major question as to the sustainability of Canada’s system is whether family is going to continue to provide that level of unpaid care that it has in the past, into the future. And as was already said, the issues that Canadian baby boomers were really the first generation to have relatively few children, so much so that according to our projections, there will actually be about 30 percent less family members available to provide unpaid care to seniors. So in other words, if family members were actually to try to keep up with the care needs of the seniors that they're supporting, they would actually have to increase their efforts by 40 percent. And not only would each person need to do more, but many more Canadians are going to be called on as unpaid caregivers, because a number of seniors, their need support will more than double.

So the prospect of meeting this challenge from a public policy perspective, it does not look good when you take into account again, the smaller family sizes, more separating divorce seniors, greater participation of women in the workforce who have traditionally, always done this work. As well as the fact that, elderly parents just no longer really live with their children as they had in the past. And also we know already that these unpaid caregivers are reporting very high levels of emotion and physical stress. So the idea of them taking on more responsibility is just not seen as a financially sustainable system.

Now, to give you an idea, if all that unpaid caregiving was to be moved to the public purse that would actually move the grand total up to $98 billion. And this is a very big number. And the real message is that if we think we have problems now, like the inadequate nursing homes, like we have hallway medicine for seniors in the hospitals, we have stress on families. We actually have 40,000 seniors that are currently on waiting list to get into nursing homes. And we actually have over 400,000 seniors reporting to have unmet need care in their homes. If we think we have problem now, we really need to know that they do pale in comparison in terms of what's to come.

So really the take-home message is that the future of long-term care, it's not just a senior's problem. It is going to affect all Canadians and not just from that financial sense in terms of taxes, but the personal lives of Canadians as more of us are going to be called on to help our aging relatives at a much higher level that has been done before.

So then the question really does become how do we get from this unacceptable present to a better tomorrow? And this is the question that we're committed to tackle at the National Institute on Ageing. It's a big part of the solution that I work on, is to help seniors themselves to better prepare, to be financially self-reliant, but also to help policy makers, to create these smarter systems, not just more expensive ones, because otherwise financial injections by policy makers, without a viable path forward, as we face these changing demographics, it's going to only make an already unsustainable system even more unaffordable.

Leanne Kaufman:

I think you're possibly understating it, Bonnie-Jeanne, when you call it a perfect storm. You're kind of terrifying me a little bit actually, but I'm glad that you and the National Institute on Ageing and the brilliant minds behind that are helping our public system bring light to this as well.

So we did also talk a little bit about the impact of the pandemic and how it shone a light on certain aspects of the gaps. It also really brought that healthcare component of retirement aging to the forefront of, I would say everyone's minds, not just in Canada, but around the world. In particular, it gave us all pause to think about where we will live and how we will be cared for, if and when the time comes in the future, when we need care. And that really has become normalized conversation. Now, we just had some recent census data come out for Canada, the 2021 census data. And it told us that the number of Canadians over age 85 is going to triple in the next 25 years, so some of that perfect storm you spoke about. And these caregiving considerations are obviously only going to become more commonplace as that happens. So what sort of things should those planning for retirement bear in mind when they're thinking about their own late life living arrangements and possible caregiving needs?

Bonnie-Jeanne MacDonald:

What I would stress Leanne, most of all is that when doing this planning, we need to really shift away from short-term thinking to long-term planning. And there's two very important reasons why this is important to take that long-term perspective. First of all, taking long-term perspectives really does help us to better plan and we can act prudently and usually we have more options the earlier that we plan. The other reason and probably the more important one, however, is that long-term planning also can dramatically change the way we evaluate our different options that we have when we move into retirement. For example, one solution that I have found in my research that would be tremendously valuable for Canadians, is their option to delay their Canada Pension Plan Benefits. Canadians don't have to take their benefits right away at age 60. And they actually can wait till age 70, and this would more than double this lifetime worry-free gold standard pension. There's really no better financial strategy out there when it comes to getting additional secure retirement income that lasts for life.

However, only one percent of Canadians do this. And in fact, 95 percent of Canadians take it by age 65. And just to give you an idea of what that means, the average Canadian is losing about a $100 thousand in lifetime worry-free income by taking at age 60, rather than 70. And you can imagine that kind of ongoing secure income would just make such a huge difference for someone who's in their 80s and their 90s, and they need to finance their cares and they're very vulnerable. So this is a solution that I believe could be very powerful in helping current retirees move into retirement.

Leanne Kaufman:

Well, thanks so much, Bonnie-Jeanne, there's so much more we could unpack and I hope you'll come back and talk to us again. But before I let you go, if you hope listeners only really remember one thing about planning to live to a 100 and beyond what would that one thing be?

Bonnie-Jeanne MacDonald:

As you said Leanne, the census told us, we are now at this stage where we have the largest population of Canadians in history, just at the brink of retirement. And my advice to them is to take that long-term perspective in their planning. It's really the biggest missing piece right now. And this is true for Canadians themselves as well as for policy making decisions. And I admit, the research is clear, it's very hard to do. Humans are much better at seeing and solving problems that are right in front of us. But retirement is a situation where taking that long-term perspective is absolutely crucial to coming up with the right decisions, not only for ourselves today, but for our future and likely much more vulnerable selves.

Leanne Kaufman:

Thanks so much, Bonnie-Jeanne for your valuable insights in this regard. And of course the investment professionals at RBC Wealth Management Canada, do have the tools and resources available to help our clients think through these matters in a real and tangible way, and to take that long-term perspective in the planning.

You can find more of Bonnie-Jeanne's work and the National Institute on Ageing's at And you can also find Bonnie-Jeanne and her insights on her LinkedIn profile.

Bonnie-Jeanne, thank you for sharing such important information about why considering these important late life factors in planning for your retirement is something that matters beyond wealth.

Bonnie-Jeanne MacDonald:

Thank you so much, Leanne. It's been a pleasure to be here.

Outro speaker:

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