Woman receiving distressing news in a letter.
Preparing for retirement is a decades-long process we focus on throughout our adult lives and careers.
However, retirement doesn’t always go according to plan. Sometimes, an illness creates a sudden need to find a Plan B.
Imagine this hypothetical situation. At 60, Dawn was diagnosed with amyotrophic lateral sclerosis (ALS). Dawn had planned to work at least until 65, but her diagnosis means that she may only be able to work another two to three years. Dawn and her husband have $800,000 in retirement savings, and she makes $120,000 per year. Now that she’s going to have to leave her job sooner and lose her last few years of retirement savings contributions, she’s wondering how to make her new reality work financially for her family.
Here’s a list of things Dawn and other people facing a life-changing illness and approaching retirement should consider to protect and maximize their finances.
Dawn’s short-term plan is to keep working as long as possible to save as much as she can. However, ALS is an unpredictable disease, and she may not have as much time as she hopes to keep adding to her nest egg.
When her disease inevitably progresses to the point of paralysis, she will need in-home care or will have to live in a care facility. Dawn and her husband have no children and he will be the only one available to care for her. Since they’ve decided that he should work as long as possible to continue to save for his own retirement, Dawn must factor in the cost of a personal care worker into her future budget.
When she stops working, Dawn should be eligible for Canada Pension Plan (CPP) right away, as well as additional disability benefits, either through CPP or the new Canada Disability Benefit Program for those who are aged 18-64. She will also qualify for Old Age Security payments starting at 65.
However, there is a caveat: if she accesses the Canada Pension Plan early, she’ll receive less in monthly payments. Normally, it’s best to hold off claiming CPP until 65 or, better yet, 70. Although in Dawn’s case, taking early withdrawals could make sense.
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As her caregiver, her spouse may also qualify for the caregiver benefit. If he eventually decides to stop working to care for her full-time, he may also qualify for EI as a caregiver.
Health Canada and Dawn’s provincial healthcare system will cover the bulk of her treatment, however things like prescription drugs, private hospital rooms and home care will not be automatically covered. Depending on her finances and the province she resides in, there may be support available for her prescription drugs.
Dawn’s private insurance can cover vision, hearing, dental and fitness programs, as well as more ALS-specific needs such as transportation to medical appointments, home health aides, caregiver support and potentially coverage for prescription drugs. When she leaves her employer-sponsored health plan, she should look into the coverage offered under her husband’s plan. It may also be possible for her to find a new plan, though with her pre-existing condition means the fees may be quite steep.
While Dawn’s current salary and savings will likely make her ineligible for provincial needs-based programs for people with limited income and resources, she should still understand the eligibility requirements of programs like the Guaranteed Income Supplement in case she qualifies going forward.
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In addition, Dawn should determine if she has long-term disability and life insurance policies with her employer. Most companies offer these policies as part of their employee benefit packages, and they may start paying something out after the policyholder is diagnosed with a life-threatening illness.
Dawn and her husband can also register with ALS Canada for access to educational resources, support for buying the equipment she’ll need to manage her life at home. The organization can also help put her in contact with ALS-specific clinics in her area and across the country, such as the ALS Clinic at Sunnybrook Health Sciences Centre in Toronto. Support groups in her province will help ensure she’s aware of any available programs that connect her with physical or financial support as her disease progresses.
While there are a number of federal programs Dawn can rely on to supplement her retirement income, she also has big decisions to make about her retirement accounts, and how best to allocate her spending so that she gets quality care during the remaining years of her life while leaving her husband with enough to live on after she’s gone.
Since Dawn and her husband are fairly close to retirement, moving the majority of their investments into low-risk savings vehicles should be a priority. That said, if her husband plans to work for closer to 10 years, he may want to keep some portion of retirement investments in a higher-risk account that has the potential to generate higher returns.
A financial advisor can help them make smart decisions about how to allocate their funds. Another piece of advice that might be offered is moving a substantial portion of their savings into a highly liquid account to cover the medical costs that are sure to crop up as Dawn’s disease progresses.
The couple should also consider consulting an elder care attorney to plan Dawn’s transition, while also ensuring her end-of-life wishes are well-planned, including a legal will and any related trusts she may want to define.
This article provides information only and should not be construed as advice. It is provided without warranty of any kind.