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Planning for health-care expenses in retirement

If you once worked for a company that provided health-care benefits but then lost your job -- and the coverage -- you're well versed on the replacement costs involved. Likewise, if you're a new retiree who doesn't have an extended benefit plan, the costs of good health care may concern you.

A growing number of Canadians, employed and retired, fall into this camp of having to pay for many benefits on their own. That trend is expected to continue as companies retract, rather than extend, costly benefit and pension plans to employees.

Canadians are worried, judging by a Harris/Decima study recently released by Investors Group. According to the results, 59 per cent of people polled expressed concern about having enough money in retirement; 52 per cent were concerned about health issues.

"I think it's a legitimate concern," says Debbie Ammeter, vice-president of advanced financial planning for Investors Group in Winnipeg. "Certainly we have a good health-care system, but people may well be thinking about extras that they're going to need that wouldn't necessarily be provided in the basic system."

This may include extended medical and dental needs, but also long-term health-care services for those people who are not able to look after themselves and stay in their own home as they age.

Get professional advice
To address those concerns, Ammeter suggests working with a financial planner. A professional adviser can help determine what those health-care expenses might be and how to factor that into a financial plan.

Ammeter's advice is echoed in recent research results from Investors Group, as well as a large poll by the Financial Planning Standards Council. "People who worked with a financial planner said they felt more optimistic about their ability to afford retirement," says Ammeter.

Consider insurance
Saving to cover health-care costs in retirement is one strategy; buying critical illness and/or disability insurance is another.

Patricia Lovett-Reid offers a wealth of information about insurance coverage in her 2006 book, "Live Well, Retire Well, Strategies for a Rich Life and a Richer Retirement."

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-- Posted February 11, 2011
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