Why are we so bad at planning for retirement?
You’ve seen the ads. A reassuring person tells you that your biggest asset, a home, can be used to fund your retirement and you can stay in your home.
I wrote about reverse mortgages, how they work and alternatives like paying for retirement out-of-pocket or with long term care insurance for MoneySense last week. You can read that article to learn the pros and cons of each option.
But what interested me in the subject was an Ipsos poll done for HomeEquity Bank. The results were interesting, with 90 per cent of those surveyed would choose at-home care, but only 13 per cent have planned for it. I asked HomeEquity Bank a series of questions to find out why Canadians aren’t ready for retirement.
What inspired this study, and why now?
The study was inspired by the increasing demand for in-home care services as Canada's population ages with a desire to do so in place (at home), and an increased worry from Canadians about how they will afford this care if needed. The need to address gaps in home care services and financial planning for retirement has never been greater. The study serves to highlight the crucial role home care workers like Personal Support Workers (PSWs) play in enabling Canadians to age in place.
Nearly 90 per cent surveyed want to age at home. What’s driving this strong preference?
The strong preference to age at home is driven by the desire for independence, comfort, and familiarity that one's home provides. Many Canadians wish to maintain their dignity and quality of life in an environment to which they feel most connected. Emotional security and the meaningful connections that come from community and family also contribute to this preference. Practically speaking, home also means proximity to familiar grocery stories, doctor’s offices, and more.
How did you measure confidence in being able to afford care?
Confidence was measured through the IPSOS survey, where Canadians 45+ were asked about their perceived ability to afford necessary in-home care services. The high percentage of respondents indicating financial sacrifices highlights the lack of confidence in preparing for and sustaining long-term care costs.
Why is there such a large gap between desire and financial preparation?
There are many reasons for the gap between desire and preparedness to age in place. For one, Canadians are living longer, more active lives than ever before. At the same time, costs have never been higher. Planning for even greater unknowns like health can be particularly challenging. The gap between the desire to age in place and financial preparation could also be due to an underestimation of the costs involved. This is where conversations with experts about the possibilities of financial planning can be life-changing.
What role do public healthcare expectations play in this lack of planning?
Public healthcare in Canada covers many essential healthcare needs, but it doesn't always account for the comprehensive requirements of in-home care and aging in place. As Canadians age, many discover that specific services, such as personal support worker (PSW) costs, age technology solutions, and home retrofitting for accessibility, fall outside the scope of government-assisted healthcare programs.
This gap highlights the importance of proactive financial planning to ensure that individuals have the resources needed to maintain their independence and quality of life as they age. By understanding the limitations of public healthcare coverage, Canadians can better prepare for the financial aspects of personalized care solutions and make informed decisions about integrating advanced technologies and home modifications into their aging journey.
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How well do Canadians understand what government programs cover—and don’t cover—for home care?
Our research results indicate that there is a significant gap in understanding regarding home care costs in general – in fact, nearly two-thirds of Canadians over 65 reported being unaware of the cost of an at-home PSW. Many are also unaware of the limitations and gaps in public healthcare coverage, leading to surprises when they eventually research the options.
What are the long-term risks of so many people not planning for support at home?
The long-term risks include increased emotional and financial stress on families, potential decline in quality of life, and the necessity to move to assisted living facilities despite preferences to stay at home.
What kind of financial planning tools or conversations should be happening earlier?
It’s never too early to start planning. Canadians should engage in proactive conversations around financial planning with experts, including assessing the possibility of using a reverse mortgage and understanding insurance options. Early dialogue about potential future care needs and the associated costs can help Canadians plan better financially for retirement and aging in place.
For Canadians who want to age in place but haven’t financially planned for in-home care, how can a reverse mortgage help bridge that gap?
A reverse mortgage can provide the necessary funds to cover in-home care costs without requiring the homeowner to move from or sell their home. It can also help cover the costs of necessary renovations or retrofitting that can enable Canadians 55 and better to stay in their homes longer. By leveraging the savings and equity in their homes, Canadians 55+ can secure the comfort and support needed to age in place.
What conversations should people be having with their families if using home equity now means leaving less later?
Families should discuss the value of utilizing the savings and equity in their home to ensure quality of life in their retirement years. With fewer pensions and limited cash savings, many older Canadians will need financial solutions that empower them to successfully age in place. These conversations about aging in place should also include the possible need for in-home care.
Additionally, in terms of a legacy, a growing trend for reverse mortgage holders is “living legacy” gifting, in which older Canadians and reverse mortgage holders use their funds to help their family members and children now, as opposed to waiting until inheritance. The idea is that family would benefit from financial gifts most now versus later – something that a reverse mortgage can enable. Making financial decisions that support your care needs now does not necessarily mean you’re leaving family members with less.
Are you seeing more interest in reverse mortgages from single homeowners or those without children?
There is consistent interest among single homeowners and those without children, as they may have fewer familial support options and prioritize maintaining independence and control over their living situation.
What misconceptions do you encounter most often when it comes to using a reverse mortgage to fund aging-in-place needs?
The most common misconception about reverse mortgages is that “the Bank will own my home.” Homeowners always retain ownership and title of the home. Additionally, reverse mortgage holders will never owe more than the home with worth, due to the Bank’s No Negative Equity Guarantee. All reverse mortgage holders need to do is keep the property in good standing, maintain insurance, and pay their taxes.
What are they using the funds from a reverse mortgage for as part of aging in place?
Funds from reverse mortgages are sometimes used to finance in-home care, pay for home modifications and retrofitting for accessibility, to pay off existing debt, or to cover everyday living expenses to ensure a comfortable and secure retirement at home. Every client has differing needs and solutions are tailored to them.
This week’s readings:
The silent revolution of women without children or husbands (NSSmag)
If you feel a little sad every August, you’re not alone and psychologists explain why (NSSmag)
Why paying a credit card fee could be worth it (Money.ca)
Housekeeping: Starting this week, two friends of mine will be writing here for August. They’ll be covering back to school, why flexibility matters as a single parent and planning for children.
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