We know it’s not an exciting topic, but it’s reality for many Canadians: worrying about covering dental and medical costs in retirement.
The trouble with budgeting for such costs is that the exercise tends to turn into a referendum on our progressive physical decline. Nothing works as well as it used to. For many of us, not even remotely. Plus, there’s the added concern about a less-than-perfect healthcare system that doesn’t fully cover the expense of caring for our aging bodies.
A recent issue of The Globe and Mail covering the topic made the additional point:
“A fortunate few retirees will continue to benefit from workplace health and dental benefits, possibly with age limits on coverage. The human resources and pension consulting firm Mercer Canada [a Canada-based provider of actuarial and benefits consulting services] says its database of workplace health plans shows that about 20 percent of companies with 500 or more employees currently offer benefits to retirees. There are premiums to be paid and deductibles in most cases, but Mercer’s take is that these plans are better than the health care insurance available to retirees and others from life and health insurers.”
Prepare To Pay Extra
That said, a great many Canadians will likely have to fend for themselves. And the price tag can be prohibitive. The Globe and Mail article offered the following capsule insights, based on interviews with several financial experts on the subject:
- Sheldon Craig, a certified financial planner (CFP), said $300 a month for a couple.
- Steve Bridge, also a CFP, said $4,000 a year per couple.
- Rona Birenbaum, CFP, observed that retirees without a health-insurance plan might want to budget $5,000 to $7,000 a year for health-related costs.
Finally, The Globe and Mail commented that “Graham Mayes, chief investment strategist and partner at Exponent Investment Management [a Canadian national wealth advisory practice] said he recently met with several clients and went over their exact expenses. He found that most people had to put aside $4,800 to $5,300 a year to cover out-of-pocket expenses for health-related matters.”
These are heavy numbers, especially for those of us on fixed incomes, to confront.
Factor In Inflation
A couple of planners consulted for The Globe and Mail article pointed out that inflation is a big factor in estimating how much you’ll spend out of pocket on health care in retirement. While the overall inflation rate has declined recently, the cost for prescription drugs and dental work has not.
All this is potentially worrying news for fixed-income retirees, but we see little point in sugaring the pill. Facts are facts, and information is power. When you identify a problem, you’ve taken the first step in addressing it!
Job one in retirement income planning must be to factor in anticipated and projected medical and dental costs. It’s a challenge for us all that none of us can wish away.
Consult with your financial advisor early on in your retirement planning process or, if you haven’t done so yet and you’re already retired, and get some sound advice concerning healthcare costs going forward. Meet with one of our credit union partners at Coastal Community Credit Union, Coastal Community Private Wealth Group or Interior Savings today for more information.