Health Care Costs Up, Retirement Expectations Down

An increasing amount of Canadians contemplate retirement

July 5, 2018

It doesn’t matter what region of Canada you live in, the idea that we all have access to ‘free’ medical care has – historically – assumed mythic proportions. Trouble is, there is a growing disconnect between the outsized health care dream we grew up with and the painful reality supporting it now – as an increasing amount of Canadians contemplate retirement.

This was the dispiriting conclusion of Gail Johnson, writing in The Globe and Mail (May 16, 2018) – Health-care costs threaten even the most robust retirement portfolios1 – and it makes for a somber reading.

Health care case study

The opening few paragraphs of her analysis set the tone with: “Susan Hyatt, an international health-care expert based in Oakville, Ont., who was working in London advising the British government seven years ago when she had to fly home to help her parents. They live in different cities, and each was experiencing a health crisis.

Despite having taught at the faculty of medicine at the University of Toronto for many years and holding executive positions on multiple health-related boards around the world, including that of St. Michael’s Hospital in Toronto, Ms. Hyatt found herself facing an extraordinarily challenging situation.

‘It didn’t matter what I did; I could not get either one of my parents moved out of a hospital setting and back into a community setting,’ she says. ‘They were both suffering from dementia and other illnesses and neither of them could go to their own homes. It took me six months.’”

Statistical support from impeccable sources

Statistical support for the enormity of the health care crisis’ that retirees face came from an impeccable – and non-government – source last year.

It took the form of a report called Who Cares: The Economics of Caring for Aging Parents2, published by CIBC and authored by CIBC Deputy Chief Economist Benjamin Tal and Senior Economist Royce Mendes. Here are some highlights of their report, supplemented by Ms. Hyatt’s personal findings:

  1. The average length of time Canadians spend as caregivers for an elderly person who becomes ill is more than six years.
  2. Nearly 30% of those with parents older than 65 needing help must take time off work, sacrificing roughly 450 working hours a year.
  3. Basic care at a retirement facility can run on average around $4,000 to $5,000 a month for one person. That climbs to a starting point of $7,000 a month for dementia care.

In Ms. Hyatt’s case, her father lives in a publicly funded long-term care home; her mom is in a private dementia facility, which costs $10,000 a month. She and her sister have surpassed the $500,000 mark in terms of her mom’s care over the past few years.

Get a handle on your retirement financial planning now

Even if you are fortunate enough to have accumulated substantial pre-retirement and retirement assets, the cost of health care can be daunting and unpredictable as seen in the case of Ms. Hyatt.

All the more reason to take an analytical look – I can and would be delighted to help, of course – at your spending habits and the potential liquidation of assets, such as second or third properties, as part of your preparation to fund increasing health-care costs.

Even though a great deal of financial modelling assumes an average rate of return between 3% and 5%, the financial crisis of a decade ago calls that expectation into question – when some investments declined by 20% to 30%.

Financial simplification

Simplifying your finances is especially important when you have the insight and energy to handle the complexity involved. It can be a burden on your heirs – not to mention a significant expense – when you have to do it as your intellectual capacity deteriorates.

As Gail Johnson reports: ‘Having a proper business succession plan and a plan to deal with accrued tax liabilities are part of the organization of finances. So is ensuring that designated beneficiaries are in place on registered accounts, estate plans and wills to avoid future conflict.’


Quoting Susan Hyatt again from Gail. Johnson report: ‘As I say to families, the 747s are on a final approach. They are going to land, and it’s only a question of whether they’re landing this week or six months from now. You better get your ducks in a row if you’re going to be ready.’ Good advice.

Michael Fahy, The Michael Fahy Group, CIBC Wood Gundy, 604-691-7207