Rebekah Young says governments and households need a better plan as too many people are relying on being healthy in their later years
Ideally, our senior years are a time for doing all those things we had little time for during our working lives, having enough money to live well, and good health throughout.
But the reality as we live longer is that at least some of our retirement will include necessity for healthcare and this is something that is not adequately accounted for according to a leading economist.
Scotiabank’s Rebekah Young, who was appointed as the bank’s first Head of Inclusion and Resilience Economics last summer, says that it’s time for governments and households to rethink retirement and to be mindful of the financial impact of long-term care needs which may require far greater savings than a frequently cited sum.
In a thought leadership article for the bank, Young notes that Canadians are living longer but that almost half aged 75 or older have at least one disability, and three in ten over the age of 85 are residing in long-term care facilities.
This is not ideal, with Canadians wanting to age in place but lacking the plan that enables them to do so.
Over 65s already account for one fifth of the Canadian population and the cohort is growing six times faster than the youth population.
Young highlights that life expectancy has increased, with an average 65-year-old today living to 86 years, but the last 6 years of life are likely to be in poor health and the costs associated can be significant.
Planning for care needs
Citing a Canadian Institute of Actuaries survey, she says that less than half of Canadians undertake financial planning for retirement and within that group, those considering the cost of long-term care is small – and those who have saved it even smaller.
“Less than one-in-three Canadians consider long-term care needs, though only one-in-ten have actually set aside funds to pay for it,” stated Young.
While the article calls for greater government support for people to be able to help themselves, which would be in the government’s interest, there is also a stark warning about the amount of retirement savings that may be required to cover long-term care.
“The oft-cited $1 million watermark for retirement at the age of 65 could easily double under a range of plausible scenarios as even modest out-of-pocket expenses to support aging in place would quickly overwhelm most households,” concluded Young.
