Canadians’ life expectancy continues to trend upwards, but are people properly preparing for their golden years? Sun Life Financial advisor Brian Burlacoff believes they are, but that’s not to say a lot more can’t be done.
And when it comes to preparing for your later years, insurance, in its various forms, is an essential tool, he explains.
“Much like when you go to your family physician, they might say to you in your 40s that if you want to live until your 90s, you have to stop smoking and lose weight,” he says. “It is the same thing with good holistic financial planning. Good life planning looks many years into the future to ensure that the policy you are buying today not only addresses what you are using it for now, but can also change into a strategy you can use 20–30 years down the road.”
People’s priorities change as they go through life, as does their insurance needs. For a policyholder with a young family, a term 10 policy may suit best, but as you age, it is likely a whole or universal life policy may become a better fit, explains Burlacoff.
“It doesn’t mean insurance can’t be purchased in your 60s or 70s, but the earlier the better,” he says. “Obviously the premiums will be more affordable, and the longer you wait to buy insurance for a financial strategy, the greater the chance of having a health issue that could increase the premium or deny coverage altogether.”
Health insurance is another key consideration for those approaching retirement. In Canada, many people are reliant on group plans for their health and dental coverage, but that benefit won’t be there after they finish their working life. And with the costs of healthcare escalating, it’s imperative to prepare adequately, notes Burlacoff.
“I have had cases where people who have not worked with me before have called and told me they are retiring next week,” he says. “They want coverage, but they have been denied as they are diabetic, or have had cancer, or a heart attack.
He continues: “It comes down to the holistic planning that a good financial planner should be providing. Someone in their late 40s might not be thinking about their dental coverage when they are 70 years old, but their advisor is.”
While a person may be covered for life and health insurance in their retirement, that doesn’t necessarily mean all their bases are covered. In particular, long-term care is a considerable expense that may have been overlooked.
“You could be working with a client, and do a retirement forecast that has a budget of $5,000 per month after tax and inflation,” he says. “What that plan doesn’t take into account is that if one or more of the spouses needs assistance to live. That can become extremely expensive, and that’s where planning should come in.”
A long-term care plan will help alleviate some of that financial strain, and like life insurance, coverage ranges.
“It provides cash flow, so if your bill is $5,000 to $6,000 a month in that facility, you are not going through all your capital,” says Burlacoff. “That can be very important for a surviving spouse. Like a life insurance policy where you choose a face amount, with a long-term care policy you can choose your weekly benefit – typically it goes from $150 to $2,200.”