Aging boomers will be shelling out big bucks in retirement for health care. Or so claims a new study to be released by Bank of Montreal on Wednesday. But what other ways are there to control retirement costs?
The BMO Wealth Institute is set to release a report on Wednesday that examines the views of Canadians on aging. One of the key findings is that boomers expect to spend a serious chunk of cash on health care costs. But the report also suggests some other ways to take on what is now being called "longevity risk", the idea that longer-lived Canadians, in an era of ultra-low interest rates, might outlive their retirement funds.
According to the report, in 1970, the average life expectancy at birth in Canada was 69 years for males and 76 for females. By 2011, lifespan had increased to 79.3 years for males and 83.6 for females. By 2061, it is estimated that there will be more than 78,000 centenarians living in Canada.
"It's clear there is a major demographic shift happening in our country. As Canadians' longevity continues to improve, they should account for the health and financial issues that come with the possibility of living a longer life," said Chris Buttigieg, senior manager, wealth planning strategy, BMO Financial Group.
According to Buttigieg, "...[it is] important to evaluate both your physical and your mental status so that you can identify what changes in your lifestyle are required to mitigate longevity risk."
That is, it is essential that Canadians take a "holistic approach" toward retirement. Develop a strategy that will help Canadians maintain or improve their health and well-being as they age as a way of combating longevity risk. The idea isn't mentioned in the report, but perhaps advisors need to work in a "health" component to retirement plans presented to clients. After all, what cheaper, easier way is there to manage the risk Canadians might run out of money in retirement?
According to the report, the expenses Canadians felt would most impact their senior years - 74 per cent cited medical and health-related costs. The report found Canadians expect to spend an average of $5,391 per year on out-of-pocket medical costs after the age of 65. Maintaining proper health will help minimize health-related costs.
Some other stats to be released in the report Wednesday:
- By 2061, there will be more than 78 thousand centenarians living in Canada
- Three-quarters feel that health/medical costs will have the biggest financial impact on their senior years
- Canadians expect to spend an average of $5,391 a year on out-of-pocket medical costs after the age of 65