In London, Ontario we love hockey. It keeps many of us entertained. A lot of our Canadian hockey players are international stars. The players today protected themselves against the unexpected by wearing the proper protective gear. But unlike hockey players, many Canadians are not protected against unexpected events like a death, a long-term disability or a life-threatening critical illness and in some cases end up going into bankruptcy or becoming reliant upon the government. This is sad because if they took the time to sit down with a trained professional to analyze where they’re financially vulnerable they could’ve deferred the financial risk to an insurance company and saved their retirement, instead of using their valuable savings or being reliant on family, friends and the government.
Just like a goalie puts on protective equipment before a game you should put enough insurance in place before you save for retirement. Protect your ability to retire well! If a goalie did not put on protective equipment and entered the net to save goals for their team without knowledge about how to stop pucks they’d quickly learn the value of wearing padding and the importance of professional coaching. So when life fires a shot against you like a job loss, death of a loved one, long term disability or a life-threatening illness you’re better able to stop it and SAVE your retirement.
Put your security basket in place and then you have a solid base upon which you can build your future financial security. A security basket includes life, long-term disability, critical illness, long-term care insurance, health benefits and an emergency fund of at least six to 12 months expenses.
You may have some coverage through work. But is it enough and is it less expensive than having your own coverage? Having coverage at work may be a good start but in case of a job loss can you take the coverage with you? Worst case scenario would be you lose your job and then get sick or die with no coverage. Better to have your own in place. Do you know someone who had an unexpected tragedy in their lives? How well did they manage financially?
Did you know you have a lot higher chance of having a disability or a critical illness than dying before the age of 65. For example, for a couple (man and woman) who are 30 and non-smokers, their combined risk (1)(2) of having a disability before age 65 is 62 per cent and getting a critical illness 41 per cent. Whereas they have only a 10 per cent chance of dying before age 65. Overall they have a 76 per cent chance of either being disabled, ill or dying before the age of 65. For a 50 year old non-smoking man and woman couple, their combined risk (1)(2) of having a disability before age 65 is 46 per cent and getting a critical illness 35 per cent. Whereas they have only a 10 per cent chance of dying before age 65. Overall they have a 62 per cent chance of either being disabled, ill or dying before the age of 65. A lot of people make sure they have life insurance coverage in place but forgo adding adequate disability insurance coverage to protect their ability to provide for their family in case of a long-term disability. The average earnings for a 30-year career are $2,008,154 (4). We protect our cars and homes with insurance and the value of these typically does not compare with our potential lifetime earnings. Don’t you think your income is worth protecting?
Like a goalie protecting the net – putting the proper insurance in place can protect you from losing your retirement
Putting things in place before you need it is wise. I have friends who I know didn’t put critical illness coverage in place before they had a heart attack. I’ve heard some had to remortgage their homes and dig into their RRSPs and TFSAs just to pay their bills, remodel their homes and install extra equipment for a wheelchair. And if you take money out of RRSPs before retirement you’ll pay taxes and early withdrawal fees. Too many Canadians think that their RRSPs are a good way to take care of them in case of a disability or illness. It’s time to change this way of thinking!
Try to apply for any type of insurance when you’re sick. Chances are it is too late
The benefits of having long-term disability and critical illness insurance in place increases your chance of retiring well. Put the risk over to an insurance company rather than assuming it yourself. Statistics have shown that if a disability lasts longer than 90 days it typically lasts 5.75 years. (3) Would your employer allow you to be off work for this long? How will you pay your bills? And if you think you can get coverage after an illness or disability you may be sadly disappointed. Chances are it is too late.
You can pay a small amount of money today to put this protection in place or write a larger cheque when something unexpected happens
Taxes, taxes and more taxes! Who likes to pay taxes? Have you ever stopped to think how much we as Canadians pay in taxes? Some taxes are unavoidable like taxes on the products we buy in the store and the gas we pump into our car. Other times, however, we end up paying too much in taxes simply because we failed to plan ahead. I love to help my clients save on taxes with investment strategies.
Are you taking advantage of all the tax preferred savings vehicles like RRSPs, Spousal RRSPs, TFSAs and life insurance? Planning well now can reduce your tax burden for the future and even help with estate planning and charitable giving. I, in conjunction with your tax accountant, can help you put a plan in place to help you reduce your tax burden today and into the future. Even if the government decides to implement a new tax or increase your income taxes you can still be better positioned for the future if you start planning now.
Once you have your security basket built you can build your retirement basket and fun basket. Are you preparing properly for retirement? Are you hoping for an inheritance or the sale of your business to get you there? I know of some family members who thought they were going to get an inheritance only to find out there was none. If you do get an inheritance then consider it a bonus and if you can sell your business for a good price when you have to then you’re fortunate. But can you bet on these things happening? Don’t gamble with your future! I encourage you to think of creating multiple income streams rather than being dependent on one or two. And if you are getting a company pension consider building your own investment portfolio yourself in addition to increase your flexibility in retirement. Then you’re better prepared to handle unexpected needs like perhaps hiring a health care worker for yourself or a loved one or taking a trip to meet a sick friend.
To help with planning your retirement London Life has created an interactive tool for you to see if you are on track. Here’s the link to HelloLife retirement income planner. Once you complete the questionnaire you can send me your personalized code for your Hello Life plan so I can review what you created. Note: Record this code somewhere safe so you can access your personalized plan in the future, otherwise you will have to create it all over again. If you have any questions please don’t hesitate to contact me. To help you gather the information required for HelloLife here is a sheet you can fill in.
We’ll all pass away someday and if you’d like to leave a good legacy insure that your wills and powers of attorneys are complete and up to date.
For a complete analysis of your retirement needs let me review your specific plan. Everyone is individual and has unique goals and dreams.
(1) The likelihood of you, your partner or both becoming critically ill, becoming disabled, or dying before age 65. The combined risk is based on the probabilities for two independent lives.
Mortality probability based on the Canadian Institute of Actuaries’ CIA9704 gender and smoker distinct mortality tables.
Disability probability based on the 1985 Commissioner’s Individual Disability Table A gender distinct incidence tables for Occupation class 2A, 90 day waiting period.
Critical illness probability based on combined incidence rates for Cancer (“New cases for ICD-03 primary sites of cancer: 2002-2007”) and the Heart and Stroke Foundation of Canada (“The Growing Burden of Heart Disease and Stroke in Canada, 2003”).
(2) Using the Manulife InsureRight app September 2017
This data is current as of March 2012. Percentages have been rounded.
Important information about this chart:
The “What’s your risk” table is for illustrative purposes only, intended to show the relative risks of different life events. The percentages in the above chart are based on a mixture of incidence rates from studies of both the insured and general population, which do not necessarily represent the same critical illness covered conditions or definitions of disability and critical illness conditions as contained in a disability policy and a critical illness policy and are not necessarily representative for any given insured person. Factors that may contribute to an individual’s risk of critical illness, disability or death include family history, lifestyle and environment.
The probability of dying, becoming critically ill or disabled before age 65 was determined by projecting claims experience to age 65 using these incidence rates and determining the probability of at least one event occurring. The probability of at least one event occurring is less than the sum of the probabilities for all three events, as individuals may incur multiple events.
You are a smoker if you’ve used any tobacco product in the past 12 months.
(3) Canadian Institute of Actuaries (CIA) 86-92 Agreement Table & Society of Actuaries – Individual Disability Experience Committee Table.
(4) Assuming annual income of $45,741 with a 2.5 per cent increase annually for 30 years. Peter Harris, So how much are we earning? The average Canadian salaries by industry and region, Workopolis.com, February 2014.