How Can I Plan for Long-term Care Expenses in Retirement?

In my latest episode, I’m sharing my top 3 tips for a peaceful retirement:

🌟The importance of planning for long-term care expenses in retirement
🌟Downsizing as an option to fund care costs
🌟And the significance of open family discussions about care preferences

These 3 aspects ensure a secure and comfortable retirement.

🎧 Discover how to plan for long-term care and secure retirement! 👉 LINK

Show Notes:

Welcome back to the Heart of Your Money. Today, I want to discuss long-term care expenses, a topic that often weighs on people’s minds, especially when dealing with the health of a parent or loved one. It’s natural to empathize and consider our own future and well-being. Many common concerns I hear include how to pay for our own care, the available options, and the desire to avoid falling through the cracks of the government care system. Planning for these circumstances is a hot topic right now, and though there’s no one-size-fits-all answer, we can take steps to prepare.

Taking this journey requires careful thought, and I wish there was a straightforward solution to this concern, which arises in most, if not all, of our future planning discussions. While there may not be an exact path or immediate answer, I firmly believe that by saving diligently, taking care of our finances, and reducing debt, we can create some freedom to plan for our long-term care needs.

The key is having choices and means when the time comes. In Canada, long-term care refers to the support provided to individuals who are unable to perform essential daily activities due to aging, illness, or disabilities. These services may include personal care, nursing care, and assistance with daily tasks.

Although the government covers some services, there are still significant costs that individuals might need to cover themselves. Planning for long-term care expenses is crucial as it ensures financial security and peace of mind during retirement. Our goal is to enjoy our retirement years without unnecessary stress or worry about what might happen in the future. So, planning for these options is essential.

Each province and territory in Canada has its own long-term care programs, particularly government-assisted long-term care facilities. The government provides funding for these care homes based on individuals’ income and assets. To give you an idea, let’s consider a general example from my home province: there’s a base charge of approximately a thousand dollars, and after that, it’s around 55 to 57 percent of your income.

In addition to government assistance, individuals can apply for the disability tax credit and the medical expense tax credit, which can help reduce taxes and ease the financial burden.

By being proactive and planning ahead, we can better prepare for the potential need for long-term care and ensure that we can enjoy our retirement years with confidence and security.

What are the alternatives if you prefer not to rely on a government-assisted long-term care facility? Long-term care insurance is one option that many people inquire about. This type of insurance provides coverage for daily expenses related to in-home care or nursing home care, usually a fixed amount like $150 or $200 per day, for individuals who cannot perform certain daily activities. While it offers peace of mind, it can be expensive, and the costs vary based on factors like age, health, desired coverage, and the insurance provider. For some, the premiums may become unaffordable, especially if they have limited retirement savings.

Obtaining long-term care insurance can be challenging as insurers often have strict eligibility criteria. Medical examinations, health history reviews, and consideration of preexisting conditions are common requirements. People with significant health issues might be deemed ineligible, or certain conditions could be excluded from coverage.

These insurance policies come with specific limitations and restrictions, so it’s crucial to carefully read the terms and conditions, including the fine print. Waiting periods before benefits take effect and limitations on the length or type of care covered are factors to consider during the research process.

Some policies have increasing premiums over time, adding to the overall expense. Unfortunately, the claims might be denied or disputed when it comes to making use of the coverage. This can be a frustrating experience, especially for those who genuinely need the support after paying into the policy for years.

Due to the complexities and potential downsides, long-term care insurance may not be the best choice for everyone. While it can work for some, more frequently, claims are denied for various reasons, even when people find themselves in difficult circumstances and require assistance with daily tasks.

The recommended approach is to include long-term care costs in your retirement income plan. Plan for the worst-case scenario while hoping for the best. It’s crucial to explore different options to pay for potential long-term care needs and not solely rely on insurance coverage that may not come through when needed.

One practical step is to create a budget that encompasses healthcare costs, including potential long-term care expenses, prescription medications, dental and vision care, and other medical needs. By incorporating these costs into your budget, you can better prepare financially for the future and ensure you can take care of your own financial well-being.


I’ll share with you a case study. Currently, I’m working on a financial plan for a high-earning professional, a specialist. As part of their retirement income planning, we’re discussing how to save on taxes and the amount they’ll need, but there’s an interesting addition to their plan. They want to allocate an extra amount per month to cover the complete out-of-pocket cost for their mother’s long-term care. They are fortunate enough to have enough income to afford this expense, allowing their mother to stay in an all-inclusive facility or retirement community. We’re also considering how to ensure they receive the same level of care when they need it in the future. Sometimes, financial planning involves not just our own needs but also taking care of our parents or loved ones and including that in our plan.

It’s crucial to take care of your own financial situation and those closest to you. By budgeting and including long-term care costs in your retirement income plan, you can plan for the future with greater confidence.

Another scenario often used to cover long-term care expenses is downsizing. Selling the house can free up funds that can be directed towards private care homes or retirement communities. Additionally, some individuals may choose to access the equity in their home to stay in their residence while still funding their long-term care needs. This approach provides access to a more suitable living environment and the required level of care.

Discussing long-term care with family members before the need arises is essential. Openly talk about your preferences and plans for care and how you intend to finance it. This ensures everyone is aware of your wishes and can contribute to the decision-making process. Some families choose to share expenses and caregiving responsibilities, leading to a collective effort in providing care.

Considering your long-term care options and including them in your retirement income planning is critical. Additionally, maintaining a healthy lifestyle, both physically and financially, can reduce the risk of needing long-term care services earlier. Engaging in open conversations with your loved ones about your preferences and plans ensures that everyone is aligned with your decisions.

Securing a comfortable retirement requires thoughtful planning, and addressing long-term care needs is an important part of that process. Thank you for joining, and until next week, take care.