Can your clients afford to grow old?

The second installment in our long-term care series urges advisors to prepare clients for the coming crisis of vulnerable aging

Can your clients afford to grow old?

Michael Nicin, the executive director of Ryerson University’s National Institute on Aging, stops short of calling the long-term care and vulnerable aging situation that’s coming for Canada’s aging population a crisis, but he’s got a lot of sobering financial data and questions for advisors to consider as they help their clients prepare for this stage – and he’s urging them to start asking those questions now.

“I think the dynamic that more people have to catch onto is to really start thinking as early as your 50s about where you’re living currently, and where you hope to stay,” Nicin told Wealth Professional. “Is it feasible? If it’s not, what should you be thinking about? Should you move somewhere? Where are you going to get care if the worst happens? What are your contingency plans? And how are you going to pay for all this?

“I think the major role advisors can play is to ask their clients the tough questions and get them thinking about it. Help them clarify what they want and then do the best job you can with the finances they have to try to match reality with what they hope to have. At least that process awakens people to the complexity of this, and then they can start making the tough choices to calibrate their plans with their personal financial reality.”

Nicin said there are more than six million people in Canada over the age of 65 – up to eight million if you count those aged 50 and up, who should plan now. There are 50,000 Canadians currently on waitlists for nursing homes and another 450,000 who are still living at home, but whose care needs aren’t being met because they don’t qualify, or want, to go to a nursing home. There isn’t enough home care available, and it’s only going to get worse.

While some Canadians are preparing, and feeling ready, many aren’t – but it’s been on a lot of minds since 60% of all COVID deaths were in long-term care facilities. The aging institute’s recent study showed almost all Canadians over 65 want to live independently in their homes for as long as possible and avoid going to a long-term care home, but COVID’s also shown how vulnerable seniors’ care is since it’s primarily based on institutionalization.   

“It’s a system that no one likes, no one really wants, and it hasn’t been working well,” said Nicin. But, public expenditure just to maintain Canada’s current seniors’ and long-term care means tripling the costs from about $27 billion now to over $70 billion by 2050 – or from 9% to close to 20% of government revenue, said Nicin, “so the public system is going to be strained – and only the wealthy will be able to afford full private care.”

“Generally, for the average Canadian, the life course progression is you age in your own home for as long as possible. Then either you or your spouse, or both, get hit with some health conditions and try to manage it with caregivers, and formal health care, but then you eventually go into long-term care.  So, I’d say it’s a crisis in that we have a system that isn’t working for people in terms of preference, and it’s expensive,” said Nicin.

“Typically, the sort of crises and health that can ship you into long-term care starts happening at about 80 or 85. Baby boomers just started turning 75 last year, so over the next five to 10 years, I think we’ll see a steep increase in demand.”

Then there’s the labor supply. Even before the pandemic, 70% of Ontario’s long-term care providers said their number one concern was staff recruitment and retention. Now they’re dealing with COVID nursing and healthcare worker burnout. “So,” Nicin said, “you have the twin challenge of Canadians can’t do this on their own. They can’t afford it. But, even if they can, do we have enough people to supply the care as it stands?”

People assume their families – spouses or children – will provide care, and Canadian families are providing about $30 billion of care a year for their loved ones. But, we’re now seeing multiple generations within a family that are all seniors: parents aged 100 being cared for by children aged 80. We also have smaller families that are often geographically dispersed, so the institute’s research shows that, over the next 30 years, more people who are aging will have less informal help from their families, so will have to spend more to bridge the gap.

Nicin urges people to start exploring what that cost of aging at home or in their communities will be, and our first story of Neela White spending $700,000 for her parents’ last years didn’t surprise him. Rent for retirement homes with independent living and some care can cost $6,000 to $12,000 a month. He said every province differs, but Ontario’s long-term care facility co-pay – to supplement what the government provides – is $70 to $80 a day, or more than $29,000 a year, and then you may have to pay for “niceties”, such as a private room. If you need help, and can’t get into – or don’t want to be in – a facility, having a nurse 24/7 costs $50 to $100 an hour, and a personal care work costs $20 to $30 an hour. How will your clients pay that?

On top of that, said Nicin, “people often underestimate exactly how long they’re going to live and what that means for their finances.” He noted many advisors are still planning for people to live to age 85 or 90, but they should be looking at 95 or even 100.

“I think people’s worst fear – maybe even more than not having enough money to do the things they’d like – is running out of money by outliving their savings,” he said. “It’s not the same as when their parents were aging. We’re living longer and costs are higher. We really need to get Canadians thinking through these issues with an expert.”