The True Cost to Live When Canadians Retire

Retirement is much more expensive than what many people estimate as they navigate through life. Changes to the economy have changed the employment landscape in Canada. It used to be that you would land a job in an organization with a goal to advance in your career within the organization, potentially work there for 20 or 30 years and then retire with a health pension. These types of jobs have disappeared.

More and more companies are hiring employees on contract and eliminating their older workforces to avoid high pension costs. People can no longer count on job tenure to finance their retirement.

The makeup of our working population and household composition has also changed. HRDC published a study that highlighted a spike in the proportion of employees who are caring for both elderly family members and have children at home. This instance has increased to 15% when compared to a rate of 9.5% a decade ago.  In addition, the aging workforce (from 55 to 65 years old), over the next 10 years will increase by more than 50%. This will put tremendous strain on the Canadian Health Care system in addition to CPP and OAS as well as corporate pension funds. This may be one reason that companies are shedding their older workforces and moving away from long term, permanent position opting for contracted workers.

What does this mean to you? Well you would be remiss to ignore these emerging trends because the impact to you when the time comes to retire will be severe. Upon retirement (age 65) the current monthly CPP entitlement ranges from $527 to $986 per/mo. OAP payments range from $510 - $540 per/mo.

In the absence of a pension plan offered by an employer or other financial planning, this is not enough money for most Canadians to live off of and maintain the same standard of life that they enjoyed when they were employed. In addition, it is a fact that most people begin to suffer with health problems later in life. When health problems emerge the low income offered by the government upon retirement is not sufficient enough to cover health care costs that are not covered by government health care like some prescription medications, treatments and in home health care.

Independent Financial Concepts Group recently released an illustration that highlights the cost of food to support 2 people who eat 3 meals per/day at an average of $10 per/meal for 365 days over 20 years. The amount that would need to be saved for food alone totals $438,000! This does not even include transportation costs, housing costs and medical expenses.

Canadians must consider their financial planning long before their retirement. This includes a combination of investment and insurance planning. Working with an insurance advisor, you can consider a plan that could include long term care insurance, disability insurance, critical illness insurance as well as whole life insurance products to ensure that you are in tip top financial shape when retirement time comes. The younger you are, the cheaper the cost of insurance planning will be so the sooner you start the better.

For more information about retirement planning in Canada please contact Gary Mandel at 416-849-1653 or visit www.wecoveryou.ca 

What is the Difference between Term Insurance and Whole Life Insurance?

There are so many different insurance products that can be taken advantage of to financially plan for your future and for the future of your children. The type of policy that you choose will differ depending on the stage you are at in life as well as your future financial goals. There are many different types of insurance; from life insurance to critical illness insurance and more. Many companies offer both whole life insurance and term insurance, but what is the real difference between these products?

Life insurance protects your family in the event that you pass. With that said, there are some life insurance policies that can serve as an investment vehicle and provide other benefits while you are alive.

Where life insurance is concerned, whole life insurance is a life insurance policy that remains in force for the insured's whole life whereas term life insurance is provided for a specified term which is usually 10 or 20 years. The advantages to whole life insurance coverage carry many benefits that include a level death benefit and level premium for life, the ability to add riders to cover additional needs, the policy never loses value, the ability to borrow against them if you need funds as well as a tax free benefit to the beneficiary. Term life insurance provides lower premiums than whole life insurance but does not carry a cash value and at the end of the term your premiums will increase if you wish to keep the coverage, or the policy expires usually around age 80 to 85.

Critical illness insurance protects you in the event that you suffer a critical illness like a heart attack and survive. Where critical illness insurance is concerned a term policy means the same thing as with life insurance. You are covered for the term of the policy. Permanent critical illness policies with a return of premiums rider present incredible value because if you don’t suffer a critical illness after a specified period of time you can receive 100% of your premiums returned to you. In this case, you can make a bet on having good health!

Determining the best insurance coverage will really depend on your age and goals. For example, an individual with no children may be better suited to a term life insurance policy. An individual who has young children will have different objectives and may be suited to a whole life insurance policy. This is because they will have a need to not only ensure that their children are protected in the event of death but also benefit from a policy that carries a cash value that they can leverage to plan for their children’s financial future.  Critical illness insurance has become very popular because advancements in medical treatments has resulted in higher survival rates amongst those who suffer a critical illness and if you are generally very healthy you may want to be eligible to get your premiums back if you don’t have a major health problem. A good insurance broker will be able to sit down with you to discuss all of your options and help you come up with the right plan for you.

If you would like more information about Term Insurance and Whole Insurance please contact Gary Mandel at 416-849-1653 or visit www.wecoveryou.ca

Life Insurance Enables You to Give Your Kids a Head Start

One of the most valuable gifts that you can give your children is a head start in life. Life insurance is an important vehicle that you can leverage to plan for your children’s future. Life insurance increases your children’s financial options when they grow older and life insurance planning should begin when your children are young. The reason that life insurance planning should start when your children are young is because that is when insurance premiums will be their lowest. 

When your children are older and starting out they will appreciate your foresight because they may have expenses that make it challenging for them to find the money to pay for their own life insurance premiums, premiums that will be higher once they’re older. Life insurance is not only used to protect people in the event of death. Whole life insurance policies offer tax benefits and can be used to establish savings that can be put towards education and other financial planning.

Arranging life insurance coverage for children provides guaranteed insurability. Many insurance companies offer options that guarantee an insured’s right to purchase additional insurance without having to submit to insurability testing like medical exams. We don’t know what the future holds so this can provide a massive sense of relief for someone who develops a medical condition as an adult that would make them uninsurable or make life insurance extremely costly. In addition, your children’s career and lifestyle choices can also impact their insurability later in life. Your foresight will mean that if they make choices that would have impacted their insurability that you have coverage in place for them.

As we mentioned whole life insurance policies offer the benefit of carrying a cash value. This means that as you contribute to the life insurance policy you are in fact building up a source of funds that your child can use in the future. This can even be looked upon when the time comes for your child to come up with a down payment on their first home. If your child doesn’t end up using the cash, the investment portion of the life insurance policy will continue to grow, tax advantaged for use later on in their life.

Finally, life insurance provides crucial support to families. In the unlikely event that something did happen to one of your children, their life insurance will prevent you from dealing with financial hardships while you are dealing with your emotional loss. You will be able to plan for not only funeral expenses and outstanding medical bills but will also be able to afford to take time off work beyond your employer’s bereavement leave. Tax free insurance funds will give you the financial flexibility to get through the incredibly tough time that comes with the death of a loved one.

There really is no better time than when your children are young to start planning for their financial future, and working with a life insurance advisor can ensure that you come up with an insurance strategy that deals with today and issues that could present themselves in the future.  

For more information about life insurance planning that enables you to give your children a head start in the future please contact Gary Mandel at 416-849-1653 or visit www.wecoveryou.ca

Impacts of Increase Life Expectancy Creates Serious Implications to Retirement Planning in Canada

Older workers have been increasingly delaying retirement since the mid-1990s, according to a recent Statistics Canada report. This is because of increases in Canadian life expectancy and even the Canadian Government has plans to raise the retirement age in Canada from 65 to 67 years old. 

This will have serious implications to Canadians because they will have to be even more financially prepared if they plan to retire comfortably and maintain their standard of life.  

Your choice of when to retire will impact your retirement planning in Canada and needs to be considered long before retirement occurs. According to Statistics Canada in 2008, an employed 50-year-old could expect to work an additional 16 years, about 3.5 years longer than workers of the same age in the mid-1990s. But working longer doesn’t necessarily mean a shorter retirement because of longer life expectancies. In 1977, men could expect to spend 11.2 years in retirement. In 2008, the expected length of retirement was 15 years.  

In 2010, the Canadian Health Institute for Health Information reported that while Canadians older than age 65 account for less than 14% of the Canadian population, they consume nearly 44% of all health care dollars spent by provincial and territorial governments. In 2008, the latest available year for data broken down by age group, provincial and territorial governments spent an average of $10,742 per Canadian age 65 and older, compared to $2,097 on those between age 1 and 64. Within the senior population, spending varies widely by age group, with health care expenditure on seniors age 80 and older, at an average of $18,160 per capita, more than three times higher than for seniors younger than age 70 ($5,828 per person on average).  

These statistics only consider health care spending with respect to health care services covered by government health care. These statistics do not consider other expenses like prescription drugs that are not covered by the government, cost of long term care facilities, costs of in-home health care and more. 

In addition to life insurance, your insurance coverage should include critical illness coverage and long term care coverage. This combined coverage will ensure that when the time comes to retire that your long term care is covered as well as critical illness. Critical illness insurance particularly is a great investment because it is so inexpensive when we are young. If you buy a critical illness policy and do not suffer a critical illness you can receive 100% of your premiums back.  If you happen to suffer a heart attack or are diagnosed with cancer, Alzheimer's or another critical illness that many seniors end up confronting with old age, you will receive a lump sum pay out which will go a long way when it comes to paying for treatments and care.

It is no secret that the later years in life are the ones where people experience increased medical problems requiring more support. The cost of retirement planning later in life becomes much more expensive so it is important, just like when RRSP planning, that you consider the insurance coverage you will need once you retire, well ahead of retirement.

For more information about retirement planning in Canada please call Gary Mandel at 416-849-1653 or visit www.wecoveryou.ca.