“Patients needing home care out of luck as waiting list grows” (Montreal Gazette Thursday November 18, 2010)

This is why I constantly preach that Long Term Care is the largest financial issue facing Canadians. Look at the date on the article and you may realize that we are about 11 years away from the beginning of the problem. There are waiting lists now – what will they be like when the “boomers” start to need care – which usually begins after age 76? The oldest “boomer” is age 65 today – that means that we are 11 years from the start of the real crisis.

I think it is safe to say that few of us have a strong desire to move into a long term care facility. Most of us would prefer to stay at home for as long possible. If we have children who live nearby they will probably assist us as we age, however, we do not want to be a burden to them. What happens if we do not have children? What happens if they live far away? Even if they live around the corner, do we either want or expect them to give up their careers or their family life in order to help us? I suspect that few of us want that. We want to enjoy our time with them and we want them to be happy and to enjoy their own lives.

What do we want for ourselves? Remember – I am 45 days older than what is officially the oldest baby boomer, who was born on January 1, 1946. We value choice, independence, and control. We want to be customers not patients. Remember that Long Term Care Insurance is not “Nursing Home Insurance”. It is what may allow us to stay out of a Nursing Home.

I want to take this opportunity to address what seems to be a significant issue among advisors and possibly clients: the fact that premiums for Long Term Care Insurance are not guaranteed.

We have 3 choices:

1. Take our chances and hope that we never need help at home or elsewhere;
2. Save our money and hope that we have enough to look after ourselves;
3. Buy Long Term Care Insurance.

I will ignore the first option and look at the other two.

Case study: female age 65, who will need care for 5 years starting at age 76. Just to have a number to work from, let’s assume the care costs are $3,000/month. I will ignore inflation for ease of calculation, but in the real world, it is a significant issue.

“Save the Money”

In order to accumulate sufficient funds to cover the cost of care of $3,000/per month ($36,000 per year) I will need to save $163,654.22 in the next 11 years. In order to reach that objective I will need to put aside $10,685.81 (at a 5% interest rate) each year. 

Long Term Care Insurance

How much would insurance cost for the same case study? The answer here is $4,104 annually - about 60% less than the savings approach. Yes, insurance costs MAY go up, but this remains a far more reasonable approach than “saving for it”. Not to mention the whole issue of: “What happens if/when I find more interesting uses for my money?”

There is one other problem with the “save it yourself” approach. What happens if you need care earlier?

The people who are most likely to need this protection are those who look after themselves. If we exercise, watch what we eat, do not smoke, and generally take care of our health, our bodies build up a great deal of strength. The obese, the smokers, and the “couch potatoes” will not live as long and are less likely to need care.

Back in 3 weeks with more.

Click these for more information on the respective topics :
Long Term Care Insurance
Disability Insurance
Critical Illness Insurance
Life Insurance
Mortgage Insurance

The most important financial issue for the next 40 years

LONG TERM CARE INSURANCE

To me, long term care insurance is the most important financial issue of the next 40 years. My first objective is simply to alert you to the issue and to give you something to think about.

I am going to address two potentially significant areas of this topic and attempt to illustrate why I feel they are important.

The first item I want to look at is perhaps obvious, but we need to think about what has happened over the past 50 years and what the implications are for our future.

This starts/begins with truly good news. We are living much longer than we did only 50 years ago. When I was a teenager in the 1960’s we thought of someone age 65 as beginning to get old, someone age 70 as very old, and someone age 75 as probably dead. Forget the change in perspective due to turning 65 today. I defy anyone to consider someone age 65 as old today. The same goes for age 70. Age 75 is where age 65 was 50 years ago, just beginning to age. I had a 70 year old man walk into my office a few years ago – with his mother!  How many of my generation remember their great grandparents? I have a friend who thought she was pregnant; had she been, the baby would have had two great great grandmothers! Virtually everyone in my generation smoked, did not watch what we ate, and had sun tanning contests. If you exclude school gyms, I remember there being 3 gymnasiums in Montreal. I think we have a few more today!

The fastest growing segment of our population is the “over 85’s”. Our “retired” life is becoming almost as long as our “working life”. Further, our definition of “retirement” is different. Very few of us have as our objective to spend our life stretched out on a beach somewhere, enjoying a cocktail. To most of us, that sounds boring. Sure, we will do some of that; but we will stay active as well. We may change what we do; reduce the hours that we work; change our “job” - but we will continue doing things. That is what keeps us young. We walk, we go to the gym, we watch what we eat, and we have significantly cut our smoking. We are living longer and we are enjoying that very much.

However there have been changes in our lives as well. Divorce – which was a taboo in Canada (actually illegal until 1968) – has become common. Families no longer live as close together. I live in Montreal and I have one brother who lives in Perth Ontario and another in South Carolina. “Two income families” are routine today. The largest threat to everything that women have accomplished since the depression is looming ahead of us – either that or a major societal change. I am not getting into the issue of “right” or “wrong” here, but traditionally women have been the caregivers in our society. That may well have been OK when women did little work outside the home, but it sure will cause some issues today. What is the largest cause of employee absenteeism today? Eldercare. Today women spend more time looking after an aging parent or a relative than they do looking after their own children. Caregiving is stressful. On a scale of 1 to 10, most report it as being a 7 or an 8.

OK – this is where we are. I do not believe anyone can realistically deny these changes.

The second item can best be termed “denial”. Canada has had a government funded health system for many years and it is perhaps normal to feel that “The Government will look after us.”

In many cases, Canadians believe – and largely because of Medicare – that the “Government will take care of us.” Sorry, not in this case. Medicare covers only care whose primary objective is “curing you”. Long term care does not “cure”. It has never been part of health care in Canada and realistically never can be. Let’s start from the basics. Taxpayers provide the money which the governments use to provide services. I was born in 1945 and we had 42 taxpayers for every retired person. It would not have been a major problem to collect sufficient taxes in order to pay for the health needs of older Canadians. Today we have just under 3 taxpayers per retiree and that number will soon hit 2. There is no way that our governments will be able to charge sufficient taxes to pay the bills, plus the longer we live the higher the bill gets – and the “over 85” population is exploding.

A study was done in the United States. Parents were asked what they wanted most from retirement: “Independence; not disturbing our children’s lives or careers; not affecting our grandkids’ education.” They then asked the children of those parents the same question: “We will do anything for our parents. They raised us. We will give up careers, promotions, and our children’s’ education – anything for them.” Faced with those two choices, neither is correct. We know that we will do our best for our parents. We love them and we will do all that we can for them.

Let’s end this alert with just a few more numbers:

Health care costs (in Quebec):

• At age 55                      $3,431 per person.
• At age 65                      $6,237 per person.
• At age 75                      $11,224 per person.
• At age 85                      $21,372 per person.

The average cost of home care for Quebec seniors?

·         About $3,500 per month

Quebec spending on homecare:

·         Based on the most recent numbers – about $37 per year

.

Chances of needing care during your lifetime if you are now age 65 (like me):

·         33% if you are a male.

·         50% if you are a female

End of stats – back soon with a solution.

Click these for more information on the respective topics :
Long Term Care Insurance
Disability Insurance
Critical Illness Insurance
Life Insurance
Mortgage Insurance