What Are Long Term Care Options for Retirees and How to Pay for it?
Table of Contents
Based on current trends and recent studies, a large number of Canadians will eventually face a difficult challenge: how to afford long-term care. Long-term care (LTC), such as an extended stay in a nursing home, can be expensive and is not always covered by public health-insurance programs. Few Canadians recognize this reality. And to make matters worse, only a small percentage of Canadians save enough money for their retirement. Many homeowners, though, can meet the challenge by tapping into the value of their homes.
According to Statistics Canada, the number of Canadians aged 65 and older will increase by four million during the next 20 years. During this time, the population of seniors aged 75 and older will double. According to some studies, approximately 17 percent of seniors will need short-term stays in LTC facilities to recover from illness or accident, while many others will rely on in-home health services to maintain their independence. By some estimates, the cost of caring for Canada’s aging boomers will reach $1.2 trillion; current government programs can fund only about half of this amount.
Does your financial plan include long-term care?
Many Canadians mistakenly believe that government programs pay for extended stays in long-term care facilities. In fact, provincial insurance programs pay for only some of the costs associated with stays in nursing homes or other residential facilities. While the cost of LTC varies widely, a stay in a comfortable facility can easily run $5,000 per month – with few or none of the expenses covered by provincial healthcare plans.
Studies show that few Canadians factor LTC costs into their financial planning: 74 percent of those surveyed by Leger Marketing, for instance, said they had no plan in place to pay for LTC in case they needed it. This statistic is perhaps not surprising – after all, when we’re healthy and able, it’s hard to imagine temporary disability or illness. More troubling, though, is that Canadians generally don’t do a good job of saving for retirement. A study published by the Broadbent Institute in 2016 paints a gloomy picture. According to the study, half of Canadian couples aged 55 to 64 have no employer pension between them, while less than 20 per cent of middle-income families have saved enough for retirement. The truth is that many Canadians will likely be caught short at a difficult time in their lives.
The Reverse Mortgage solution
A potential solution exists for homeowners aged 55 years or older, though: the CHIP Reverse Mortgage. Established in 1986 as the Canadian Home Income Plan, a CHIP Reverse Mortgage is a made-in-Canada financial solution for homeowners. Under a CHIP Reverse Mortgage, a homeowner can receive up to 55 percent of the value of their home in cash – while continuing to live at home.
Many Canadians aged 55 and over plan to retire on their savings and the equity in their homes. The value of many Canadians’ homes has grown considerably over the years and can typically make up a good portion of a person’s net worth. But unless the home is sold, its value can’t be realized. A CHIP Reverse Mortgage enables eligible homeowners to continue to live in their home while receiving up to 55 percent of its assessed value – a potentially elegant financial solution.
Provided by HomeEquity Bank, a Schedule 1 Canadian bank, a CHIP Reverse Mortgage enables homeowners to get the money they need in precisely the way they want it: as a lump sum, for instance, or in monthly payments. And a homeowner is always free to make monthly payments, if they so chose. A CHIP Reverse Mortgage can offer an ideal solution, particularly for Canadians who have not factored potential LTC expenses into their retirement plans.