Special to the The Globe and Mail – By Dianne Maley
A year or so ago, Evelyn and James were looking forward to their impending retirement. Then Evelyn fell ill.
James’s first impulse was to quit his job to spend more time with his wife. But he also wants to ensure they can afford the best possible care.
“My wife was recently diagnosed with a form of dementia, which will, in the long term, require full-time care,” James writes in an e-mail. Costs for dementia care in an assisted-living home range from $6,000 to $10,000 a month. “It is highly uncertain as to when this level of care will be needed and for how long.” Survival rates, it seems, are “highly variable, and in some cases people can survive 20-plus years after the diagnosis.”
James, who will soon turn 62, earns $168,000 a year plus a bonus of about $50,000 working in sales. Evelyn is 59 and no longer working. She gets a defined benefit pension of $17,640 a year, including bridge benefit, falling to $10,600 at the age of 65. They have two sons, both in their early 30s.
“I had thought of retiring now to enjoy the time of relative lucidity, but I’m very concerned I will not have adequate resources to afford her care when it will be required,” James writes.
They are not without means. They have a house and an investment condo, rented to relatives at cost, as well as registered retirement savings plans and James’s substantial defined contribution pension plan, to which both he and his employer contribute.
“So the question is, should I continue to work and build the financial assets to provide care in the future?” James asks.
We asked Ian Black, a fee-only financial planner at Macdonald, Shymko & Co. Ltd. in Vancouver, to look at James and Evelyn’s situation. Mr. Black holds the registered financial planner (RFP) designation.
WHAT THE EXPERT SAYS
First, Mr. Black explores the most “financially difficult” situation, where James retires on his 62nd birthday this spring to spend time with Evelyn. This forecast assumes Evelyn lives another 20 years beyond the current year, that home-care costs are $24,000 a year for the six years she remains at home, and that residential care costs are $120,000 a year for 13 years. It also has James paying off their line of credit now.
“This assumes James and Evelyn can make do without paid home-care support for two years,” Mr. Black says. Their sons, who live nearby, help with their mother’s care.
“Under this scenario, all financial assets are exhausted by James’s age 70 except for his defined contribution pension plan,” Mr. Black says. He assumes James’s DC pension is converted to a locked-in retirement account, or LIRA, which has minimum and maximum withdrawals limits.