Seniors not factoring failing health into retirement plans
Consider a power of attorney and rethink that dream home, experts advise
By Sean Davidson, CBC News
Posted: Jan 4, 2013 5:52 PM ET
Last Updated: Feb 26, 2013 3:08 PM ET
Doing other people's taxes can be quite a challenge — even more so if they don't know about it.
Just imagine trying to collect all those slips of paper, rooting through various investments, accounts and pensions, and dealing with the folks at the Canada Revenue Agency on behalf of two taxpayers who don't know what you're doing.
That was the situation I landed in last spring, doing the T1s and such for my grandparents, for whom I have power of attorney. Both are in their mid-90s — and, frankly, on the brink of incompetence — and have forgotten they put me in charge of their finances a few years ago. And it's a bit of a touchy subject, as money tends to be with some seniors.
'When people are planning their financial retirement, they need also to plan for health-care retirement.'— Mark Handelman, Whaley Estate Litigation
So, for the time being, I'm in the interesting position of running their finances from the shadows, sneaking around, waving my POA at bankers, lawyers and an international assortment of pension services.
Let this be a lesson, say experts, to think about more than just dollars and cents when it comes to retirement planning. The bigger picture is much more complicated, and many near-retirees do not do enough to prepare for the possibility of failing physical or mental health.
Discuss finances, health early on
"When people are planning their financial retirement, they need also to plan for health-care retirement," says Mark Handelman, a lawyer with Whaley Estate Litigation in Toronto.
"But it's not handled well most of the time," he adds, often because people are simply reluctant to discuss such things.
Handelman and other experts urge their clients to establish power of attorney for both finances and health care relatively early – partly because, as with wills, it's best to set up such documents well in advance of any dementia or similar issues setting in to prevent possible legal challenges.
If a trusted family member is looped in on financial or health-care conversations early on, it also increases the chances that the memory of their involvement will remain as age takes its toll.
Handelman says about 90 per cent of his clients arrive unprepared for the health issues of old age. He recalls one client — an elderly man who was born in Russia, lived in Germany and settled in Canada — who had not made his wishes clear to his family and was running out of time as age ate away at his language skills. He had already forgotten English, leaving him unable to talk with his children, and was en route to losing German, the only other language his wife knew.
Meet frequently with adviser, POA
According to the Alzheimer's Society of Canada, one out of every 13 Canadians has some form of dementia by age 65. By 85, it is one out of three.
"If you've got a POA trying to manage some elderly person's assets, it becomes a big issue if they've been managing it themselves until then," says Toronto-based financial planner Barbara Garbens.
"Then the POA has to step in, and you're dealing with a whole bunch of different variables like cash flow, rate of return and risk tolerance."
Seniors should meet frequently with their investment advisor and POA, says Garbens, "so that there's synergy about how to manage the estate." (And, presumably, fewer extended phone calls to Scottish pension officials...)
Plan for long-term care
Dementia also greatly increases the chances that one will need to go into a long-term care facility. Almost half of Canadian seniors will live out the last three or four years of their lives in such a facility, according to Statistics Canada.
Saving more, and taking out long-term care insurance, can further future-proof one against failing health, says Garbens, though the number of firms offering such coverage is shrinking.
"It's not a profitable piece of the insurance business," she notes. "At some point in the future, there might not be long-term care insurance, and people will have to look for alternate ways to pay for it."
'Nobody wants to think they'll get to a stage that they're not able to drive.'— Cherith Cayford, CMG Financial Education
Many retirees do not set aside enough money or consider how other changes brought on by aging might affect their lives, agrees Cherith Cayford, a financial planner and educator with CMG Financial Education in B.C.
Consider renting over owning
Many seniors dream of retiring to a little place in the country. But Cayford warns that the remote farmhouse or cottage that looked so appealing at age 65 could soon be a problem if someone loses their driver's licence or needs regular medical attention. Suddenly, being far away from public transport and other services is not so idyllic.
Cayford says she has had several clients who were painted into corners by their supposed dream homes.
"You're in the middle of nowhere, and there're no facilities around," she said. "Nobody wants to think they'll get to a stage that they're not able to drive. It comes as a shock to some people."
She says seniors should be more open to renting.
"Renting gives you a lot more flexibility and lets you use your equity elsewhere," Cayford said. "People get this fixation on buying and owning. And yes, it's ideal to go into retirement owning your home, but that's not to say you should always live in an owned property."
Top News Headlines
- Harper chief of staff resigns amid Senate expense scandal
- Nigel Wright has resigned as Prime Minister Stephen Harper's chief of staff, following revelations he wrote a $90,000 cheque to repay living expenses claimed by Senator Mike Duffy. more »
- Jeep driver apologizes after stunt kills Edmonton woman
- A man claiming to be the driver of a Jeep that struck and killed a spectator at a charity event in Edmonton says he is sorry for what happened. more »
- Senior Pakistani politician Zahra Shahid shot dead
- Voting in Karachi goes ahead a day after gunmen killed a senior member of Imran Khan's Movement for Justice (PTI) party outside her home in Karachi. more »
- US Virgin Islands environment head arrested for drug trafficking
- Federal agents have arrested the top enforcement officer for the U.S. Virgin Islands environment agency on drug trafficking charges after he was allegedly caught with a cache of cocaine on a government patrol boat. more »
Latest Business Headlines
- 1 year later, Facebook stock remains below IPO price
- A year after Facebook's high profile IPO, investors are still skeptical about its prospects and the stock price is wallowing. more »
- IRS's integrity at stake in scandal over screening of conservative groups
- Unloved in the best of times, the Internal Revenue Service will have to scramble to convince U.S. lawmakers and the public that its intentions were pure, not partisan, when it subjected groups affiliated with the Tea Party movement and other conservative causes to special scrutiny. more »
- GM shares close above IPO price for 1st time in 2 years
- Shares of General Motors reached an important milestone on Friday, closing above their initial public offering price of $33 US for the first time in more than two years. The day wasn't bad for GM's rivals either, with Ford shares closing above $15 for the first time since May 2011 and Toyota, Honda and Nissan all hitting 52-week intraday highs. more »
- AECL to cost $236M more than expected this year
- A new report from the parliamentary budget officer shows Atomic Energy of Canada Ltd. continues to be a drain on the public purse and will cost an additional $236 million this year. more »
The data on this site is informational only and may be delayed; it is not intended as trading or investment advice and you should not rely on it as such.