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Make long-term care insurance a part of retirement planning, advisors told

Advertisement With RRSP season approaching, financial planners should take the opportunity to ensure their clients are prepared for all aspects of retirement, including the unexpected, according to Al Kinch at Desjardins Financial Security. Speaking at the Independent Financial Brokers’ Fall Summit on Tuesday, Kinch said many people planning for retirement fail to consider the hefty costs associated with health care that can unexpectedly arise. This is increasingly becoming an issue since people are living longer, and their retirement savings must therefore last longer. “People can outlive their income,” Kinch said. He encourages financial planners to discuss with their clients the costs they will face in retirement, and the risk that their retirement income could fall short given the emergence of unanticipated costs. Kinch recommends long-term care insurance, a type of product becoming increasingly popular among Canadians who are approaching retirement. The insurance, offered by several financial institutions in Canada, provides a benefit when the insured are unable to care for themselves. Such a benefit can be generous given the vast expense involved with long-term care, according to Kinch. For instance, home care can easily add up to $3,000 per month, and a private long-term care facility can cost between $1,500 and $5,000 per month, depending on the province and area of residence. Even government-subsidized facilities can cost between $1,000 and $4,100 per month. In contrast, most Canadians believe the monthly cost of a room in a long-term care facility is approximately $2,000, according to a 2006 Desjardins Financial Security survey. “Assistance comes with a price-tag,” said Kinch. He added that even the need for long-term care for one person in a couple could significantly diminish that couple’s retirement savings. Furthermore, statistics show that 50% of people aged 65 and up will require long-term care at some point in their lifetime. And the more affordable option of care-giving by family members is becoming less common, since Canadian families are smaller than they used to be, as well as more spread out, Kinch noted. For these reasons, Kinch said long-term care insurance is an increasingly popular way for advisors to help clients ensure their future health problems or care needs won’t eat into their savings and reduce their quality of life. “Once you’ve helped people get their basic retirement plan together, bullet-proof their assets,” he said. IE Read other news from our Financial Planning Section