How Advisors Can Help
By Karen Henderson
There is a Sufi saying that two veils separate us from the divine—health and security. As we age we begin to understand how these two words start to define what is truly important in life.
According to Moshe Milevsky, finance professor at York University’s Schulich School of Business, for a couple who is 65 today, there is a 50% chance at least one of them will live
to 90 and a 22% chance one will reach 95.
With advanced age, however, often comes disability and loss of independence caused by chronic illness. Canadians on average now live the last 10 to 12 years of their lives with disabilities, many of them the result of chronic illness.
According to a recent Globe and Mail article by Andre Picard, chronic diseases pose a greater threat than a pandemic flu.
Why? Over 80% of the population aged 65 and over living at home has been diagnosed as having a chronic health condition. Over 40% of people aged 65 and over living at home have arthritis and rheumatism. Over 30% have high blood pressure, 22% have food or other allergies, 17% have back problems, 16% have chronic heart problems, 15% have cataracts, and 10% have diabetes. (NACA)
Falls pose a particular threat to the aging. Among those aged 65 years and older, 85% of all injury hospital admissions were for falls. A fall can be the beginning of the end because so many other adverse events result from a fall – including hip fractures, isolation, admission to a nursing home or death.
I believe that Alzheimer Disease and related dementias are the diseases of the 21st century. The greatest risk factor is age; approximately 35% of those over age 85 will suffer from some type of dementia.
Chronic illness eventually leads to long term care and gradual loss of independence. How long does long term care last? The real answer is: No-one knows.
We do not have statistics on how long home care lasts but the average stay in a long term care facility or nursing home is about 2.5 years. My personal care experience lasted 14 years; my father stayed in his own home for 10 years and in facilities for 4 years.
Loss of independence leads to loss in many other areas of life. Physical losses include loss of mobility and the resulting loss of freedom. Social and psychological losses include less interaction with others, a reduced quality of life and feelings of helplessness and hopelessness.
In addition, financial loss resulting from chronic illness and loss of independence can be crippling for a number of reasons.
- Unlike hospital care home care is not covered by the Canada Health Act; therefore what was free in the hospital – medications, supplies etc. – have to be paid for when being cared for at home.
- Job loss resulting from illness or from being a caregiver can be devastating, particularly for women who leave the workforce for many years to care for parents or a spouse, losing both salary and future pension earnings.
- To date Canadians do not benefit from any sort of outright caregiver allowance. Available instead we have tax relief or indirect compensation. Although some amounts increased in 2004, too many caregivers do not qualify and even if they do, the complex tax calculations and rules may be beyond them.
“Canada has, for example, a number of tax credits that may be taken in whole or part by caregivers. These include the Caregiver tax Credit, the Disability Tax Credit, the Eligible Dependent tax Credit and the Medical Expense tax Credit. While collectively these tax credits may amount to as much as $10,000, few caregivers are, in fact, eligible for anywhere near this amount. As a general principle, the credits are least useful to caregivers who most need financial assistance.” (Fast, Janet. Caregiving: A fact of Life. Transition. The Vanier Institute of the Family. Summer 2005.)
- Finally – and perhaps most sadly – because we do not plan for aging, we have no idea how much care costs, how much money we may need and how we should go about saving for long term care. We don’t know that facility care can cost up to $4,770 a month or that private, professional 24-hour home care can easily exceed $50,000 per year. (Remember that the vast majority of Canadians want to stay at home.)
How advisors can help (“Chance favours the prepared mind”.)
In my view, today (and the next 20 years) is the best time to be a financial advisor. I see the tipping point (a sociological term that refers to the moment when something unique becomes common) on the horizon for long term care in Canada, due to the convergence of demographics, spiraling health care costs and a boomer generation who wants to control its destiny – and quality and accessibility of health care. Canadians are rapidly becoming more open to change regarding long term care delivery and the financial options available to them.
- Become knowledgeable about the health care system, in particular the long term care system – its components and costs
- Educate your clients. Discuss long term care with ALL your clients, regardless of age. Better planning means better preparation, because a health care crisis can occur at any age.
Suggest a family meeting NOW, before such a crisis occurs.
- Ask your clients the tough questions which include:
- How do you see yourself aging?
- If you were faced with a long term care need tomorrow, where would the money come from to pay for it?
- Have you had a discussion with your children/spouse about how long term care services would be provided and paid for if you needed care? Look for clues to their future:
- Did your parents live long lives?
- Does Alzheimer’s run in your family?
- Understand terms and definitions of services such as home care, retirement home/nursing home care etc.
- Commit yourself to the marketing and sale of living benefits by building a resource library for you and your clients and staying current with related trends
- Be persistent. Find ways to present and repeat your message on a continuing basis for clients
- Finally – and most importantly – prove your belief in the need for living benefits products by buying them yourself and having the care conversation with your parents and your own family
My father died at the age of 93, suffering from multiple conditions including crippling spinal arthritis, stroke disease and mixed dementia. He always told me that you don’t want to be poor when you’re old. I had too many years to see how right he was.