As healthcare improves, most Canadians expect to live way past their eighties but if they do, the chance of developing age-related conditions and requiring long term care increases.
Long term care is a threat to your retirement nest egg. It costs about $100 – $175 a day, or $35,000 -$65,000 each year, to meet the long term care needs of one senior. It wouldn’t take long before such a bill depletes your retirement nest egg.
If you are counting on government programs, the situation is worse. Presently, the government only meets a small fraction, 18 percent, of long term care costs. On the other hand, family members pay up to 75 percent. Worse still, experts predict a crisis in funding the ballooning public long term care bill.
So, how can you protect your retirement nest egg from illness?
One solution is using private insurance or long term care insurance.
Assessing Your Need
Possibly you are pondering “Do I need an additional insurance plan?” That’s fine and normal. But, if you can afford the premiums, we would rather you ask yourself these questions:
- How much are you saving for your retirement?
- How well can your nest egg take an extra annual hit of $35,000 – $65,000 when you are in your eighties?
- Will you rely on family for support?
How Does It Work?
Long term care insurance kicks in when you are unable to perform two of the six aids to daily living. These are Bathing, Dressing, Transferring, Toileting, Continence, and Feeding.
There are two ways long term care plans work. You can opt for a regular monthly or weekly income from the insurer and use it at your discretion. Alternatively, the insurer can pay your long term care bills. Either way, long term care insurance is generally much cheaper than making out of pocket payments.
The good part is, premiums are usually significantly lower for younger applicants. Also, the payments from the insurer are not subject to taxation. But the best part is, you’ll have peace of mind knowing that your retirement nest egg can be protected from the financial effects of illness and you won’t be a burden to your family.