Pricing the Priceless

Author: Mark Smigel, CFP® – Certified Financial Planner®,
EPC™ – Elder Planning Councelor

My mother-in-law once said, “Getting old isn’t for sissies.” As I quietly observed her ageing journey into the unknown world of assisted living, and later, facility care, I think she was right. The challenges of being an elder amid the other one third of aging Canadians showcases growing concern around patient need, patient volume, and underfunded patient care.

Initial Stages of Care

In the initial stages, we try our best to keep mom and dad in their original living environment, and, if possible, we become their primary care givers. This gives our parents the dignity of being treated like responsible adults but also forces us to juggle raising our own families, maintaining work obligations, and committing to friendships outside of the home.

We commit to caring for our folks through time and action, including but not limited to:

Attending doctor’s appointments
Refilling prescriptions at the pharmacy and ensuring the proper dosages are maintained
Shopping for groceries and ensuring the food is fresh and safe to eat
Repairing glasses, sizing walkers, and ensuring hearing aids are charged
Reviewing mail when it becomes overwhelming for them
Chasing off scammers, spammers, and others who wish to prey on mom and dad

Cognitively, comprehension slips with age, and their dependency on us goes up. They get scared, and their anxiety begins to change our lives too, and not without emotional cost – late family suppers, missed hockey games, and cancelled spousal date nights.

Costs can also get co-mingled with your personal finances for items not covered by Fair Pharmacare:

Hearing aids
Seat cushions to avoid bedsores ($500-$678)
In-home care costs are variable ($36-$50 hour) and the experience is mixed in predictability.

Both parent and child will likely become exhausted, and slow to admit that additional help may be a good thing. So, after we wrestle with guilt in coming to this conclusion, where do we go from here?

Next Stages of Care

Health Care Assessment

Let’s begin with the acknowledgement that our loved ones must endure a primary healthcare assessment with a Health Authority member to come up with a documented health baseline for their growing needs.

Expect to wait a number of months before an assessment professional is available.
This exercise is seldom embraced by our parents since it is capturing the realities of ageing that may not be warmly embraced (eg: memory loss, repetitive story telling).
Few parents want a stranger added to their care-giving world and moving is a major life decision that requires full information before undertaking.
Expect parents to be coy with their answers, perhaps even comical, to avoid information being used against them.
Try to find a moment to giggle if you get some humour – you will need it later!

Assisted Living

Should the journey continue to an assisted living community, recognize that there are both funded and unfunded categories. All Health Authorities offer funded living programs in both private and non-profit partners. Payments are deducted using an EFT/PAD mechanism for the first of every month, and the rate you pay depends on if you qualify for government support or not. The monthly stipend covers the basics, which includes:

rental accommodations
meals
light cleaning
flat linen laundry services
onsite social/recreation activities
24-hour emergency response

Additional costs: Families will pay extra for onsite grooming (eg: hairdressing/barber), foot care nurse, dental hygienist, TV, internet and personal telephone. ($250-$400/month depending on facility/service)

Private vs Public Facilities

Public Facilities: Elders who qualify for facility care are put on a wait list and families are encouraged to select more than one location – there is no way of really knowing what opens up, when or where. The Health Authority makes this decision based on volume and availability. As you would expect, public facilities have a lower overall cost, and fewer comforts.

Private Facilities: There is also a market for private assisted living sites, where a health Authority does not have any involvement in determining resident eligibility. You can contact these sites directly or by checking Assisted Living Registrar’s website and clicking on “Finding an Assisted Living Residence”. Like most things in life, you get what you pay for. As such, please make site visits and bring questions. Each facility (private or public) will give you a guidebook which helps address the most commonly asked questions and provides different online resources.

Who Gets Government Funding and How Are Costs Calculated?

Funding is income tested. Funded assisted living is intended for elders with low to medium incomes who require assistance with personal care.

70%-80% of mom/dad’s after-tax income is used as the metric. Line 15000 of their tax submission will be used as the gauge and it will include investment income.
This is measured annually and recalculated accordingly; please review this with your Connect Wealth advisor to ensure that mom/dad’s portfolio is structured in a tax friendly way for income testing purposes.

The costs savings for funded assisted living is well worth it. In our family’s case in 2021, funded assistance in a public facility came to $1660/month, with extra services charged accordingly. This was a shared room with a stranger and limited personal care

Moving from Assisted Care to Private Care

In looking for more hands-on care in a facility closer to our residence, we moved our loved one to a private facility. The cost was $6500/month for an unfunded facility, and it gave her:

a private room,
active caregivers, and
more quality attention to detail.

After re-assessment and confirmation that she required 24-hour attention for her security (6 months later), she was given funded care status and the rate was reduced to $2189/month.

Average Time in Care

Gerontologists tell us that residents typically spend 3-5 years in facility care before they pass, and along the way, to expect the costs will grow more than $125,000. Recognize, too, that the cost of care could be much higher if you have involuntary separation with one person requiring care, and the other still requiring living expenses in their own home.

Ageing affects more than just the elder – it hits the entire family, both in the heart and even perhaps, in the pocketbook. Having honest conversation in advance and fashioning your expectations will help because it won’t be easy for most families. Your financial advisor at Connect Wealth is available to help discuss and plan and prepare for this stage in your family’s life. So buckle up – ‘cause this journey ain’t for sissies!

Connect Wealth is an independent financial planning firm that offers holistic advice to clients based on their current goals and future aspirations. We use well-established workflows and cutting-edge technology to maximize planning efficiencies while simplifying the process for clients. Learn how you can maximize your financial opportunities at www.connectwealth.com

Saving For Retirement

What Are Your Options?
What is the best investment plan to use to save for retirement? It used to be fairly simple; the answer was maximizing your RRSP. Do you know what is the best strategy for your situation? Do you know what your options are?

Here is a basic overview:
1. Save – The first rule of thumb to be concerned about is that you are saving money for your future. Too many Canadians are spending all of what they earn and not putting away any money for their future. A good place to start is to aim at putting away 10% of what you make.

2. Tax Efficient – Ever since the launch of the TFSA, there has been a debate by financial professionals over which investment plan is more tax efficient to use, the RRSP or TFSA? My opinion is that it depends on your situation both now and in the future and should be looked at on a case-by-case basis to see what fits best. I would be cautious if a financial advisor is always only promoting one plan type over the other, both have their benefits. (For more info on TFSAs, see my article from Sept 2013 – http://jaybrecknell.ca/demystifying-tfsa/)

3. Business Owner – If you are a business owner the question can get even more complex as you have more options. Should you use your RRSP, TFSA or instead save your retirement funds in a holding company? Since corporate tax rates are at an all time low in Canada more business owners are saving corporately versus in a RRSP or TFSA. There can be many benefits to saving corporately as it can provide flexibility to the business owner. As this can be complex it needs to be put together by a professional that understands your corporate structure and the tax and legal rules that are involved.

As with any financial strategy we would recommend ensuring that you have your personal situation reviewed by a professional to make sure that is done in the best way possible. If you have any questions or would like your plan reviewed feel free to contact us.

Questions?

December 1, 2014/by Vince Olfert

Business Planning

Business Owners Fail To Plan

Prepare Your Business For Sale
Only 9% of business owners have a documented transition plan in place and yet 70% of small business owners plan to transition in the next 10 years*! As a financial planner I continue to meet business owners who are planning to sell or transition their company but they do not have a plan. Typically they are either unsure of the process, so they procrastinate or the business is their baby and they do not want to let it go. It is understandable that a major decision like this is hard to make, especially without someone to assist you.

When a business owner is considering selling here are some things to consider:

1. Don’t Leave the Party Last – You see this with professional athletes when they face the question of when to retire? In my opinion you are either growing your business or it is shrinking it, there is no standing still. A lot of business owners later in their career can get into maintenance mode, which usually means the business is starting to decrease in revenues. At first the revenues may hold but after a couple of years you typically see them start to decline. If you want to maximize your selling price and be attractive to potential buyers be careful to wait too long.

2. It Takes Time – Selling a business can take you longer than you think. You need to find the right candidate to take over your business. You are looking for an individual that is an entrepreneur; remember there are more employees in the world than business owners. Also, in most transitions the current owner is asked to stay with the company to assist with the passing of the reigns. You should plan for 1-2 years to sell. This means you should be creating a plan 5-7 years prior to your planned exit.

3. Change – Every industry is faced with changes due to technology, regulatory, competition, etc. If you owned a video or record store in the 80 or 90’s, when was the best time to get out? What if the technology that Google is working on to make it so that cars drive themselves eliminate car accidents in the future. Could that affect you if you own an auto body business? What changes face your business?

4. Financials – Often times the financial statements for a business are ignored until it is too late. Yet they will play a very important role in the sale of the business. You want to make sure that your financials present the best view of your company so that a potential buyer is enticed to make an offer.

There are many things to consider when selling a business. The first is to get a professional that can assist you with putting a plan together to ensure that you maximize the value, save tax, and control when and how you sell your business. As with any financial strategy we would recommend ensuring that you have your personal situation reviewed by a professional to make sure that is done in the best way possible. If you have any questions or would like your plan reviewed feel free to contact us.

Questions?

*Source – http://www.advocis.ca/Update2014/index.html

December 1, 2014/by Vince Olfert

Insurance, Personal Planning

Protecting Your Biggest Asset

The Most Overlooked Risk
What is your biggest asset? Most people might answer your house, boat, car, or investments. When in fact it is your income and your ability to earn a living.

When I review a person’s financial situation, one of the most common areas that is overlooked is to protect their ability to earn a living. Disability insurance is a critical part of a person’s risk management plan. When you think about all of the things that people have insurance for, cars, houses, electronics, death, etc. Unfortunately if you do not have an income all of these other areas fall apart.

When it comes to managing risk, a financial planner looks at two main factors:
1. Risk – what is the chance of this happening?
2. Impact – If it does happen, what is the potential damage?

As an example, the risk of a house fire is low but the damage it can cause financially is extreme. Hence why people buy home insurance.

The Risk Is High:
Did you know that 1 in 3 people, on average, will be disabled for 90 days or more at least once before they reach age 65?*

The Impact Can Be Severe:
How long could you survive for without your income? Most families could last maybe 4 to 6 months before they would have to start selling other assets such as investments or their home. How would you survive till age 65 and then into retirement?

The main way to manage this risk is to have long term disability insurance to protect yourself in case of an illness or injury.

Possible Options:
1. Canada Pension Plan – This will only pay for the most severe disabilities and the amount is small.
2. Worker Compensation – This only covers you if it is a work related injury.
3. Group Plan – This is how most Canadians are covered. IMPORTANT! You should have your coverage reviewed to make sure you are properly protected.
4. Individual Plan – You can purchase this through the major insurance carriers.

Key Facts:
• If you are an executive or earn over $80,000 per year and you have group coverage you should have it reviewed, as you may not be fully protected.
• If you have group coverage your plan definition typically will change after 2 years of being disabled. This can allow the insurance company to decline your coverage if your disability is not severe enough. This is done to keep your rates lower for your group plan. You can get individual insurance to protect against this.
• The definition of a disability policy is critical.
• Most disability insurance is designed to cover you till age 65; some may have only a 5-year benefit period.

Questions?

*Source – “A guide to disability insurance”. Canadian Life & Health Insurance Association

December 1, 2014/by Vince Olfert