Wealth Strategies: Long-Term Care Costs – Beware

Preparing for one's golden years - aging care and retirement included - can be a complex task. Case in point: long-term care costs, as extensively highlighted in a 2024 advisor.ca article.

The most common path - barring any sudden changes that accelerate the individual's needs - tends to progress from at-home care to  some form of retirement home/assisted living, and finally on to a long-term care/nursing home for the remaining years.

When someone is still in the at-home care stage, other costs come into play as well, some of which may include  home upgrades and retrofitting, home maintenance and cleaning, and assistance with items such as food preparation. The at-home care costs generally involve a 3-hour minimum window, ranging from $35 -$50 per hour.  Renovation and retrofitting costs may be rather substantial, depending on the size of the home, as can ongoing maintenance. All of these costs can eventually tip the scale to the point where a retirement home or long-term care home may make more sense financially. However, many seniors are inclined to delay and resist transitioning to a care home, even as their care needs increase, which may lead to higher care costs in the interim.

Although the Province does provide some subsidies for the public system of retirement and long-term care homes, costs remain beyond that what is covered. The public system requires health assessments and potentially others as well, not to mention often long wait lists, which can stretch to a year or more. The patient-paid portion may still nudge up to ~$3,000 per month for a private room, while low-income seniors may qualify for a further reduction. Typically the individual must be unable to perform at least two activities of daily living (dressing, bathing, toileting, eating and maintaining continence) before they can join the waitlist. During the time when one is on the waitlist, the  issue of how to manage their needs in the interim arises, and the applicant may need to rely on one, or a combination, of  family, friends, and at-home care, with its subsequent costs. Private care notable comes at a higher price tag, which can easily range from $6,000 - $15,000 per month depending on the level of care required.

Now that we’re aware of the process and challenges, how does one address these? For people that are still of a relatively young age, long-term care and critical illness insurance can certainly help mitigate future costs. And the premiums will be substantially lower at a younger age ie. 30’s and 40’s.

Long-term care insurance, in essence, pays a monthly income style benefit once you’re unable to perform a certain number of activities of daily living due to aging, injury, illness, or a range of other factors. Plans vary but can typically be used for at home care, retirement residence or long-term care home costs. Critical illness on the other hand is a lump sum benefit designed to assist with specific illnesses, ie. cancer, stroke, heart attack, organ failure etc. Plans again vary on the specific coverages and requirements before the lump sum benefit is paid.

Incorporating additional cushion into your retirement expenses and financial plan will also assist and should be discussed with one’s financial planner and/or advisor.

Bearing in mind the potential long-term care costs, setting proper expectations for future inheritances through family discussions is also an important consideration.

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DISCLAIMER: Opinions and estimates are written as of the date of this report and may change without notice. Opinions and estimates are written as of the date of this report and may change without notice.  Any commentaries, reports or other content are provided for your information only and are not considered investment advice. Readers should not act on this information without first consulting their licensed insurance advisor. This communication is intended for Canadian residents only and does not constitute as an offer or solicitation by anyone in any jurisdiction in which such an offer is not allowed.