Tuesday, July 7, 2009

Who Will Care In The Future?

I have a great idea. Let's do our income taxes, buy some life insurance, spend 45 minutes on hold with a company telling you they value you as a client, then go arrange for a will and power of attorney, and just for fun, let's put mom into a seniors home. Sounds like a fun day, doesn't it.

It seems like life is filled with things we hate to do. Thankfully we don't need to do these things too often (imagine if we could stop doing and paying our income taxes). However, it never ceases to amaze me that people don't think they need a will and power of attorney. As I love to point out to these same people...


Having a properly designed will and power of attorney is important if you meet the following criteria:

1. Age 18 or over

No, I did not delete the rest of the list. Personally, if you are over age 18 and of sound mind, then I believe a will and powers of attorney are important things to arrange. Have minor children? That just raises the "importance" bar several notches. Why you may ask? Let me ask a simple question? If you were to become incapacitated due to a medical issue, who would you want to oversee your personal affairs? Without a properly designed power of attorney, a family member or friend must apply for the right to look after things for you. I certainly hope that whomever they appoint sees things the same way you do. They then have a measure of control over your finances, your health etc. Think it's not true? Here's the link to the Office of the Public Guardian info on the topic. There have been horror stories where the Public Trustee's office stepped in and whamo - say bye bye to some of your money.

Sounds easy then right? Arrange a power of attorney and will and all is fine. One other little problem. As most of you know, society as a whole is aging. What used to kill people, now leaves them disabled. The miracles of modern medicine now prolong life, but at what cost. Most of you will have a memory of a relative in some "retirement home" or hospice. One of my strongest memories of these places was the antiseptic smell. Those are the "affordable" places. In this case, the phrase affordable has a somewhat hollow ring to it. Check out the costs of provincially-run institutions on this link. The really nice ones are more like country clubs or hotels than a medical facility. These nice places also cost an insane amount of money. How much? Would you believe $4,000-$7,000 per month and up. What are the alternatives?

Here's the good news. You can always move back in with one of your kids. They won't mind - after all you raised them and now it's simply a matter of returning the same favour. They may not see things in the same light (see my opening comments), and wonder where to put you. They may still be raising their own children and I am sure you'll feel very comfortable sleeping in the room next to your grandchild who has a habit of only wearing black clothes, listening to strange music, spends an inordinate amount of time on computers and is still finding him/herself.

A second option are the aforementioned facilities run by the province. For far too many Canadian seniors, nursing home care is inaccessible or unaffordable. In some provinces, wait lists for nursing home beds are excruciatingly long — up to two years. Most beds become available only when residents die.
Private nursing home care can cost between $40,000 and $70,000 a year, depending on the community. This is clearly not a viable option for most seniors. In the patchwork system that has evolved, it is apparent that public and non-profit nursing home care provides the most affordable solution. But even this option is becoming unaffordable for many seniors as these facilities struggle to fill the funding gap left by government funding cuts.

Option number three is to sell your home and move into something "easier" to deal with. That approach always sounds good to the kids. Whether that means a condo or "seniors residence", it also means losing some of your independence, and for seniors, a loss of independence is "the next step towards complete dependence".

The fourth option is to spend your money on in home care. This remains a viable option for people with the financial wherewithal to stay home and have home-care people assist with the "Activities of Daily Living". Private nursing home care can cost between $40,000 and $70,000 a year, depending on the community. This is clearly not a viable option for most seniors.

The other problem may surprise you. Your children are getting concerned about "mom and dad". Many of them are already at that crossroad. Middle-aged couples are wondering how to approach their parents about their "declining years". Aging parents are wondering what their options are. Will the problem stay the same? Not likely. Currently, 17% of adults are over age 65. The number of Canadians aged 80 and over will double in the next 20 years - and triple in the next 40 years. The number of seniors in Canada has increased by one million in the last decade. By 2020, there will be as many seniors as children! These issues will further complicate the problems we already face.

Long term care insurance goes a long way to solving the problem. It provides a way for older family members to solve their finance issues. It allows them to maintain their dignity, while choosing whether they need to move to a facility-care residence, or simply need some help with meals and housework. One of the best things I have ever seen on the topic originates in Ottawa. The Council on Aging of Ottawa publishes and updates a lengthy handbook on the topic. It addresses almost every possible concern and as a "disinterested" party, you can count on the contents not being a sales pitch for some company.

Let me close with this thought for you. The three greatest expenses for the Canadian federal government are:

  1. Paying interest and principal on our deficit
  2. Health care expenses
  3. OAS (Old age security) program

As the population ages, tax revenues will decrease, health care expenses and OAS payments will increase. Do you really believe the government will suddenly have a lot of extra money to fund new "seniors homes"? You may find a nice private home, but at what cost? Think about your options before the choice is made for you.

Stay Well and Pay It Forward.

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