Special to The Globe and Mail – By Dianne Maley
Before Beatrice’s husband died, they sold the family house and invested a substantial sum in a portfolio designed to generate as much income as possible. The rest of the sale proceeds they used to renovate the family cottage and make it their home.
“Here, for the past 20 years, my mum has lived frugally, and only recently has her health required more care,” her son, one of five children, writes in an e-mail. At the age of 91, Beatrice is in the early stages of dementia and depends on a live-in caregiver, a family member.
All was going well financially until the pandemic knocked down the stock market, laying bare the riskiness of Beatrice’s investments, at least one of which has suspended distributions – money Beatrice relies on to pay for her care. While the stock market recovered, Beatrice’s portfolio is still languishing, her son adds.
“We, her children, are looking for direction and options on how to manage these assets,” her son writes. “Her financial adviser has not changed the assets significantly despite our calls to reduce risk and focus on a 10-year plan to unwind her assets to support her financial needs.”
Will their mother be able to stay in her home for the rest of her life? the son asks. Are there changes that should be made to the portfolio?
We asked Keith Copping, a principal, financial planner and portfolio manager at Macdonald, Shymko & Co. Ltd. in Vancouver, to look at Beatrice’s situation. Macdonald Shymko is a fee-only financial planning and portfolio management firm.
WHAT THE EXPERT SAYS
Beatrice has financial assets of $868,000, a house valued at $1.25-million and no debts, Mr. Copping notes. Her income consists of $1,708 a month in Canada Pension Plan and Old Age Security benefits (some OAS is clawed back), $3,600 in withdrawals from her non-registered portfolio for her in-home care and $3,810 in registered retirement income fund withdrawals.
“Based on her age, expenses and net worth, it is reasonable to assume that she has the financial means to cover her health care for the rest of her life,” the planner says. “As to whether she can stay in her home indefinitely will really depend on how her health situation and care needs progress,” he adds.
To be conservative, Mr. Copping uses a life expectancy for Beatrice of age 100 to 102 in preparing his forecast. “Based on the current care needs and expenses (home care expenses of $3,600 month), from a financial standpoint she could stay in the home for many years, perhaps to 100 or 102,” the planner says.