How much money will you need for your future care?


Man doing his accounting, financial adviser working

The costs of senior living can be challenging for many families, especially as seniors age and medical conditions evolve. In addition to home maintenance and in-home care, finances may be needed for a potential downsizing, rent costs for a seniors residence, increased medications, and other services such as transportation and personal care.

None of us at any age can know for certain how our health will evolve and the unknowns can hinder efforts for financial planning. However, despite the uncertainties, there are some financial planning steps that one can take to be better prepared. If you have a financial advisor, involve him or her in your planning process also.

The foundation of budgeting for senior living is the same as budgeting for anything else – it boils down to knowing your income, planning for your potential expenditures, and making sure your expenditures don’t exceed your income.

Getting to understand your assets and income

In addition to your income, it would be a good idea to understand your assets as well, as they can potentially be a source of funds. To start off, make a list of income sources that either currently provide you with cash or could in the future. Here are some examples:

  • CPP and OAS
  • Private pension plans (e.g. from a former employer)
  • Investment income
  • Veterans Affairs
  • Long term care insurance

Next, make a list of your main assets. Some examples of notable assets are:

  • Real estate
  • Life Insurance plan
  • Investment portfolio
  • Business ownerships
  • Valuable personal belongings such as fine art, antiques

Now, let’s turn to expenses. Make a list of your current expenses and the amounts that you spend each month for each item. The next step is to do some realistic research and planning around potential future expenditures. Here are some tips:

  • Is your plan to stay living at home for as long as possible? If so, what are the hourly rates for in-home care and how many hours do you want to budget for? Plan to have this number increase as you age.
  • Do you see yourself potentially moving into an assisted living residence? If so, what are the costs of the residences in the area of the city in which you want to live?
  • If your health evolved to a state where a move to a full care residence was needed, can you afford a private pay residence? What are the costs for the care residences in your area? If you foresee you’re likely to seek a government subsidized care residence, what is the percentage of income that you would have to pay?
  • As you age are there other services that you might want to budget for, such as transportation costs if you ever were to stop driving? A meal delivery service if you ever were to lose the inclination to cook meals?

Talk to your financial planner about constructing a financial model for yourself, which will be influenced by any wishes you may have for estate planning. Here are some things to consider in constructing your financial plan:

  • Are there any assets that you want to pass on to the next generation?
  • Which assets are you willing to sell or leverage in order to fund your senior living costs?
  • Are you married? If so, you will want to develop a plan with both spouses in mind, and include contingencies for either spouse, as it is likely that both spouses will age in different ways with each person requiring care at different points in time.
  • Include inflation in your budgeting of costs
  • Plan to have increasing costs as you age. It is expected that one will have escalated health needs as one ages, leading to increased care costs.

Everyone’s financial situation is unique, and as we all age, our care needs will also be unique. While it is impossible to predict our spending needs exactly, having a base plan will at least give you the general parameters upon which you can make informed decisions.