The Most Important Thing Baby Boomers Forget About When Planning for Retirement
As you grow closer to retirement age and the anticipation grows, the time seems to fly past. You might be excited to spend more time with family members or travel more frequently, or simply spend more time working on your passions and hobbies. You’ve worked hard to create a retirement portfolio that fits your lifestyle, but as you approach your retirement goal, there may be surprises that make you question whether you’re as prepared as you had hoped. With rising inflation, increases in the price of consumer goods, and unexpected health care costs, how do you know if you’re truly prepared? Talking with a financial advisor about preparing for the unexpected can help take the weight off your mind. It also helps to know what challenges other people face and how you can be prepared for them.
Planning for Your Future
No two retirement plans are identical because you have distinct goals and needs. You also have a personal vision of what your life will look like once you’re retired. When you first begin to map out your finances with your financial advisor, including the dollar amount you’ll need to support yourself as you age, you’ll likely be thinking of your housing costs, your monthly bills, and desired expenses. These regular items can usually be covered by a combination of the Canadian Pension Plan, Old Age Security, and your additional investments, RRSPs, and savings.
However, the one thing many Canadians forget to factor into their plans and calculations is health care costs. Have you considered what you’ll do in the event that you require additional health support? Will you stay in your home and hire home care services, or will you move to a retirement living space or assisted living? These are important questions to answer to prepare yourself for your financial future and ensure you have quality care when you might need it most.
The Unexpected Cost of Health Care
For many Canadians and Albertans, the cost of health care can come as a major surprise. We often assume we’ll remain in our homes happily right until the end, but the reality for most clients is a little different. There are two primary decisions to make when thinking about your retirement future. If you require health care assistance on a daily basis, will you choose to remain in your home or move somewhere with on-location support? The cost of both options can vary drastically. As a pre-retiree, you have the opportunity to research your options and make financial decisions accordingly to prepare ahead.
Living at Home vs. Retirement Homes
One question all pre-retirees want to consider is where they want to live. Do they want to stay in their own home for as long as possible? Or would a retirement living facility with built-in support be preferable?
In recent decades, retirement home living has been a popular trend for Canadian retirees. But since the COVID-19 pandemic started, new polls have shown that Canadians are rethinking their plans. With many retirement homes suffering from low staffing and outbreaks, the idea of living at home has become much more desirable. However, the switch in plans is not always seamless or even possible, as the difference in costs can be surprisingly significant.
Living In Your Own Home
Many Canadians believe that living in their own home will be the more affordable option when they reach retirement age. If you own your home and have paid off your mortgage, it’s easy to see how remaining there is an appealing option. You’ve probably thought about home maintenance costs and potential upgrades you’ll need as you age, such as a walk-in bathtub or a stairlift if necessary.
If you are still paying off your mortgage or renting your home, you’ll want to factor that cost into your savings plan as well. Other aspects of at-home living that you’ll need to review can include expenses such as yard maintenance, regular bills, and home repairs. If you have the good fortune to have family nearby or friends who can help you out in these areas, you might save some money there. However, it can also be tough to depend on others when their own plans may change, so be sure to have these conversations early wherever possible.
Another option to think about if you want to remain in your own home is to downsize to a smaller space. Moving to an apartment or condo where the building maintenance is taken care of by others can help make staying at home more manageable. But there is one major cost that you cannot easily avoid if the service is needed: healthcare. If you require additional home support or medical attention, the choice to remain in your home may be challenging, especially if you haven’t accounted for it in your financial plan.
The Cost of Homecare in Alberta
Clients can be surprised by the actual cost of home care compared to care provided in retirement living facilities. For those that qualify for the provincial Home Care Program, there are no costs for the patient. However, the care provided is not 24/7 and is primarily focused on medical services. If you require on-call support, or assistance with items like getting dressed, cooking, or housekeeping, you’ll need to pay out of your pocket for those additional services. Private home care providers can charge anywhere between $30/hour and $60/hour. Depending on the level of care you need, you might be facing a monthly bill of several thousands of dollars to remain in your home.
The average monthly cost of living in a retirement home or supported living facility in Alberta ranges between $2000 and $4500 per month, depending on the city you live in, the level of attention you require, and the size of your apartment. The difference between living in a retirement residence versus your own home is that you’ll have continuously available support in a retirement residence. For some, living at home is worth the investment and requires a reassessment of their finances. For others, the cost of retirement living is more appealing and obtainable.
Retirement Planning Advisors in Edmonton
At Regan Schiller & Associates, we want to help you master your retirement. We’ll meet with you to discuss your unique situation, review your personal goals, and ask critical questions to ensure your financial planning leaves no surprises. Contact us to arrange your free consultation—we look forward to working with you to plan a bright retirement future!
This is a general source of information only. It is not intended to provide personalized tax, legal or investment advice, and is not intended as a solicitation to purchase securities. Regan Schiller is solely responsible for its content. For more information on this topic or any other financial matter, please contact an IG Wealth Management Consultant.
