Retirement planning + health insurance

Planning for your retirement? Remember – it’s not all about how much you’ve got saved

Retirement planning. It’s not on many “100 Exciting Things To Do With Your Time” lists, but it’s undeniably important. It gives us a sense of whether the money we’ve been working so hard to save is going to last us for as long as we need it to once we’ve entered retirement. Certainly something we all need to know, even if the answer might scare us a little.

When I meet with prospective clients for the first time – and if they’ve started to put together a retirement plan in the past – what I see quite often impresses me. I see people who have put effective strategies in place, who have chosen their investments wisely, and who have a very good idea of how much money they’ll have when they finally decide to hang ‘em up. That’s always great to see. 

But it’s not all they need to think about.

What many people fail to consider, perhaps because it’s not a pleasant thing to contemplate, is what can happen to their retirement plans if their health declines – either in the short or long term. But that’s certainly something people to think about, unsettling as it may be.

Quite honestly, the most valuable asset most of us have is our ability to earn an income. It’s more valuable than our houses, our current retirement savings, and likely any other material asset we own. And quite frankly, if that goes away due to illness or injury, it’s a good bet our ability to retire comfortably will as well.

So here’s something you need to think about when putting together your retirement plan: health insurance. Whether it’s insurance designed to protect you immediately (like critical illness or long-term disability insurance) or during retirement (long-term care insurance), people who ignore these products are taking a significant risk.

Putting this topic in perspective

Imagine you’re a somewhat typical 40-year-old in the GTA. You and your spouse both earn about $100,000. You own a home worth about $1,000,000. The mortgage on it is $500,000. You have two children to support. But you’re living comfortably, able to enjoy today and also save money for comfortable retirement. If nothing happens to your or your spouse’s health and you keep earning that living, you’re probably doing well for yourself.

But what if something does happen to your health? What if you’re diagnosed with a serious illness, or injured in an accident? And you don’t have critical illness insurance, and your employer’s group benefits plan doesn’t include long-term disability insurance? You still have to live, perhaps with hefty medical bills. You still have the mortgage. You still have car payments. You still have bills to pay, and children to support. But now your family’s income is cut in half.

People in this situation have options, but none of them are good. They usually consist of either re-mortgaging their home or depleting their retirement savings much earlier than they planned to. And both of these lead to troubles down the road, the biggest being much less money left for retirement. That’s why people often say it’s more expensive to survive an illness than to die from it. It seems unnatural to think that way, but it can very well be true.

For this reason I always, always, make sure my clients have considered health insurance as part of their retirement plan. It’s invaluable and in many cases, not that expensive. Buying this type of protection gives people peace of mind knowing if anything happens to their health, their lifestyle – and their family’s – will continue as normal. Without it, people are gambling with their family’s financial well-being – something that always makes me worry.

Getting health insurance isn’t as painful as many people think

There’s lots to know about health insurance (also referred to as living benefits) that I haven’t touched on for the sake of time and space. But people are often surprised at how inexpensive it is to protect their family from this risk – especially when some products offer a full refund of premiums if you stay healthy and never actually use the insurance.

If you’ve got any questions about anything I’ve written here, please feel free to contact me.

Mark McDonald

You can reach me at [email protected] or by phone at 905-617-1930.